Tougher China market weighs on BMW
Print Edition
GERMAN luxury carmaker BMW said yesterday that its second-quarter net profit fell 1 percent year on year to 1.75 billion euros (US$1.92 billion) due to higher costs to bring out new vehicles and a tougher market in China.
Munich-based BMW AG said also 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 11.7 percent in the corresponding period 12 months ago.
Analysts said key BMW models such as its 5 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 in the fall.
Renewing models is costly, but pays off if the new version sells better than its competitors. BMW faces tough competition in the luxury sector from Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi.
The company also cautioned that the Chinese market — once a source of rich profits for German carmakers — is “normalizing” and becoming more competitive.
BMW sales there slipped 1.4 percent in the quarter, and Chinese economic growth has slowed in recent months.
BMW’s new Chief Executive Harald Krueger said in a conference call that the company remains “positive about China for the medium and long term.”
The company said also that it remains convinced China has strong potential due to the comparatively low level of vehicle ownership and growing middle class.
Overall, BMW sales rose 20.2 percent to 23.9 billion euros.
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