BMW earnings slip on China, costs for new models

AP News
Posted: Aug 04, 2015 5:50 AM
BMW earnings slip on China, costs for new models

FRANKFURT, Germany (AP) — German luxury automaker BMW saw net profit slip 1 percent in the second quarter amid higher costs to bring out new vehicles and a tougher market in China, a major pillar of its profits.

The company said Tuesday that net profit fell to 1.75 billion euros ($1.92 billion) from 1.77 billion euros in the April-June quarter of last year.

Munich-based BMW AG also said it sold a less profitable product mix containing more compact cars, which typically earn less per vehicle.

The profit margin before interest and taxes, a key earnings figure, fell to 8.4 percent in the quarter from a strong 11.7 percent in the year-ago quarter.

Analysts say key BMW models such as the 5 Series and 7 Series sedans are nearing the end of their life cycle, which can hurt sales as customers see newer products from competitors. The company has already unveiled a new 7 Series, which will go on sale this fall.

Renewing models is costly but pays off if the new version sells better than its competitors. BMW faces tough competition for luxury car sales from Daimler AG's Mercedes-Benz and Volkswagen AG's Audi.

The company also cautioned that the Chinese market — a source of rich profits for German carmakers in the past several years — is "normalizing" and becoming more competitive. BMW sales there slipped 1.4 percent in the quarter. Chinese economic growth has slowed in recent months.

'Believe Women' Is Perilous Baloney
Michelle Malkin

BMW's new CEO, Harald Krueger, said in a conference call that the company remains "positive about China for the medium- and long-term." Krueger took over May 13 from Norbert Reithofer, who became board chairman.

The company says it remains convinced China has strong potential due to the comparatively low level of vehicle ownership and growing middle class.

Overall, BMW sales boomed 20.2 percent to 23.935 billion euros, thanks to record numbers of vehicles sold around the world but also strongly boosted by currency exchange rate shifts.

BMW shares traded down 1.1 percent at 90.55 euros in midday trading in Europe.