BMW AG Faces Profit Decline Amid Trade Tensions and China Sales Drop

BMW AG’s carmaking profits are projected to fall below targets due to trade tensions and declining sales in China, with automaking margins expected between 5% and 7%. CEO Oliver Zipse emphasizes growth ambitions despite challenges, planning new electric vehicle production. However, tariffs and market conditions impact profitability and sales volume significantly.

BMW AG anticipates that its carmaking profits will fall short of long-term objectives due to escalating trade tensions and declining sales in China. The company projects an automaking margin of 5% to 7% for the year, a decrease from 6.3% in 2024, marking the lowest level in four years. BMW aims to maintain returns above 8%, a target now under strain as it faces intensified competition in the Chinese market.

To address its market challenges, BMW will launch its Neue Klasse of electric vehicles by year-end and is set to introduce 40 new or updated models across various drivetrains by 2027. CEO Oliver Zipse stated, “We have growth ambitions because we have strong products. We look with a positive mood into 2025 despite all the political turmoil we might have.”

The impact of tariffs in the US and Europe is detrimental; CEO Zipse noted the financial impact could reach around €1 billion in 2024. BMW continues to navigate these challenges, with plans to increase North American production to meet local content requirements and mitigate tariff impacts.

In 2024, BMW reported a significant net profit decline of approximately 37%, totaling €7.68 billion, impacted by a recall of vehicles due to defective braking system components. Additionally, global car sales faced a downturn of 4%, primarily attributed to a notable 13.4% drop in sales in China, where overall demand has softened.

While BMW forecasts some growth in sales this year, driven by stabilizing inflation and slight interest rate reductions, challenges persist, particularly in the Chinese market. Analyst Harald Hendrikse from Citi expressed caution, indicating optimism about growth in Europe and the US may be misplaced, given the situation in China.

In conclusion, BMW AG is grappling with significant challenges impacting its carmaking profits, primarily stemming from trade tensions and reduced sales in China. Despite a projected automaking margin below desired targets, the company is poised to introduce innovative electric vehicles and expand production strategies in response to global market dynamics. However, the broader economic landscape, especially in China, presents ongoing uncertainties that could impede recovery efforts.

Original Source: www.business-standard.com