Noticeable minus
BMW’s profits are shrinking significantly
May 8, 2024, 11:16 a.m
Listen to article
This audio version was artificially generated. More info | Send feedback
High costs for wages and parts as well as fiercer competition are putting pressure on BMW’s earnings. The Munich car manufacturer’s profit fell by almost 20 percent in the first quarter.
The Munich car manufacturer BMW is feeling headwinds from higher costs for wages and parts. The bottom line is that the company earned almost three billion euros, which is 19.4 percent less than in the first quarter of 2023. Higher production costs played a role: from the second quarter of 2023 onwards, the costs for wages increased and also in the first quarter Remained at this level in 2024. There is also fiercer competition because more vehicles are available again after the pandemic. Accordingly, prices for new and used cars are under pressure.
The profit margin in the car business, which is important for the company, was 8.8 percent, 3.3 percentage points below the previous year’s level. This indicator has therefore been in the long-term target range of eight to ten percent for nine quarters. At BMW, the first half of the year is traditionally stronger than the second half. At the same time, sales fell slightly in the first quarter to 36.6 billion euros, slightly lower than analysts had expected. Most of the major car markets are currently experiencing growth, with growth particularly in the mid-price segment, explained BMW. Demand for premium cars is currently weakening, particularly in China.
In the first three months, the group sold a total of 1.1 percent more vehicles, primarily from the core brand BMW. However, things went worse at Mini, where a number of model changes are pending, and at Rolls-Royce. BMW is sticking to its forecast for the year as a whole. Positive impulses should come from the new 5 Series and the better availability of the 7 Series models. Profit, on the other hand, will also decline due to higher investments.
The Munich-based company is aiming for an investment rate of six percent for the current year. The main focus is on expanding the production of electric cars: A plant is currently being built in Hungary for the “Neue Klasse” model family, which is scheduled to roll off the assembly line from next year, as well as battery assembly plants at several locations.