BMW anticipates a slight decline in pre-tax profit for the year due to increased expenses in research and development, manufacturing, and personnel costs. Moreover, a fall in the cost of used cars is expected to turn out to be a major cause of the predicted decline.
Challenges in the first quarter
During Q1 trading the Munich corporation saw a slump in the profit margin of the automotive segment. The drop is due to prolonged high costs and weakened demand for luxury products in China.
Financial performance
BMW’s pre-tax margin in the car segment dropped to 8.8% from 12.1% compared to the previous year. This figure fell below analysts’ expectations of 9.2% as per the company’s compiled consensus. Although car sales increased by 1.1%, first-quarter revenue experienced a slight decrease.
Impact of pandemic supply chain shortages
Automotive manufacturers took an advantage of the pandemic by asking for higher prices when supply chains were at shortages. In addition to that, the demand from used cars caused the rise in prices of vehicles coming off lease.
Investment in electric vehicles
BMW is beefing up its portfolio of electric vehicles and model upgrades throughout the vehicle range. The company anticipates a surge in consumer spending this year with the overall spending surpassing the EUR 7.5 billion this year. In the midst of these investments, Walter Mertl, the CFO, highlighted the need for keeping the strategic course.
Competition in the EV market
BMW is competing for position in EV segment with Chinese manufacturers and Tesla. Competitors such as Mercedes-Benz and Porsche are also investing huge capital in order to keep up with the fast-growing market.
Financial results
In the first quarter, BMW’s group pre-tax profit declined by 18.9% to 4.1 billion euros, although it exceeded analysts’ expectations of 3.9 billion euros. Sales of fully electric cars witnessed a notable increase, rising by 28% to 83,000 vehicles during the quarter.
Despite facing challenges such as rising costs and intensified competition in the EV market, BMW remains committed to its strategic investments in electric mobility. The company’s focus on innovation and adaptation to changing market dynamics positions it for future growth and sustainability.