BMW profit weighed down by rising spending

Business Friday 04/November/2016 14:01 PM
By: Times News Service
BMW profit weighed down by rising spending

Munich: Third-quarter profit at BMW’s automotive unit fell as the German manufacturer spends more on developing electric cars and struggles to sell luxury sedans in the US where buyers prefer sport utility vehicles.
Earnings before interest and taxes fell 3.9 per cent to 1.8 billion euros ($2 billion) highlighting the spending pressure the company faces as it tries to compete with new entrants including Uber Technologies and Tesla Motors, while also developing new high-end vehicles that can better rival Mercedes’s updated lineup, especially in the US.
BMW, which is set to lose its crown as the world’s best-selling luxury car brand this year, is trying to boost profitability by pushing its more expensive products. That strategy’s paying off in Europe and China, where sales increases in the third quarter offset a slump in the US, where the company is struggling to produce enough SUVs at its factory in Spartanburg, South Carolina.
"BMW didn’t make electric cars a key pillar of their strategy overhaul earlier this year, so now they look to be backtracking a bit,” said Dominic O’Brien, a London-based analyst with Exane BNP Paribas."We didn’t get more details on the electric car strategy, and there’s not yet been a formal presentation about it to the market, about how they’re going to do it.”
BMW’s third-quarter return on sales from carmaking fell to 8.5 per cent from 9.1 per cent in the same quarter last year. That compares with a profit margin of 11.4 per cent for Mercedes. BMW stuck to its forecast that the margin in 2016 will be between 8 per cent and 10 per cent.
The shares fell as much as 2.2 per cent to 73.61 euros and were down 1.9 per cent as of 9:09am in Frankfurt trading, bringing the loss so far this year to 25 per cent.