Yahoo Finance BMW warns over sales and profits as it runs into a cocktail of troubles
BMW has issued a profit warning as a cocktail of new emissions controls, higher costs from dealing with faults and an intensifying trade war put the brakes on the upmarket car company.
The German car maker said that revenues and profits will dip and its profit margin target of between 8pc and 10pc will not be hit for the first time in eight years. The news drove down BMW shares by 5pc, their biggest fall in two years.
Fallout from the 2015 Volkswagen emissions scandal was one of the prime causes of the downgrade. This led to the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLVTP) in September.
The new testing regime for vehicle emissions in comes closer to emulating real world driving conditions than previous laboratory tests, however, bottlenecks in the ability to test cars to WLTP standards have led to what BMW called “significant supply distortions” in European markets and “unexpected intense competition”.
Manufacturers have not been able to get all their cars WLTP approved, meaning they cannot sell them until they have been tested to the new standard.
BMW said it was prepared for this but some car makers have been dumping cars on the market to beat the new regime, resulting in heavy discounting.
BMW also said it was facing higher goodwill and warranty costs. The company has suffered a series of high-profile problems with cars, requiring mass recalls. Troubles have included electrical faults causing cars to cut out completely and wiring problems that could lead to fires.
The trade war between the US and China and the imposition of import levies is also hitting the company. BMW exports the X5 SUV from its plant in Spartanburg, South Carolina, to China where the marque is popular among status-conscious motorists in the world’s largest car market.
BMW said that “continuing international trade conflicts are aggravating the market situation, feeding uncertainty and distorting demand”.
BMW boss Harald Krüger added that the company “remains fully committed to its goal of leading the transformation of the industry”, referring to the challenges of electric and autonomous vehicles, as well as consumers looking at new forms of ownership such as short-term rentals and car sharing.
He added that ongoing cost and efficiency measures will be intensified.
BMW’s downgrade also hit other car manufacturers with shares in Mercedes-owner Daimler and VW also falling.
Analysts at UBS said the warning not only triggers 10pc to 15pc downgrades for BMW and risks BMW’s “safe haven” reputation, but raises questions about whether the wider car industry could be about to enter a downturn.
