BMW will be looking to cut some costs in the upcoming months, as announced today by officials from Munich. The BMW Group will be aiming at improving its numbers further, even though the results it recorded in 2018 financially are not as bad as some expected. Operating profit did take a hit of 7.9 percent but considering the current situation with trade tariffs and the big investments made in electric vehicles, things are still rather good.
“2018 was a challenging year for the automotive sector as a whole. Nevertheless, we achieved the second-highest Group profit to date,” said Harald Krüger, Chairman of the Board of Management of BMW AG, in Munich today. “The challenges facing the entire sector are unlikely to diminish in the coming months. Great efforts will therefore be needed across the entire Group to help shape the sector’s transformation under such conditions.”
The shift to the new WLTP test cycle caused significant supply distortions on several European markets, leading to unexpectedly intense competition. That’s because most manufacturers rushed to sell their inventory before the new regulations kicked in, at the start of September. BMW refused to cut its prices in the same way. In the third quarter of the financial year 2018, increased statutory and non-statutory warranty measures resulted in significantly higher additions to provisions in the Automotive segment.
“We expect strong headwinds to continue to effect the entire sector in 2019. However, we are tackling these various challenges systematically, in order to emerge from them even stronger than before,” stated Nicolas Peter, Member of the Board of Management of BMW AG, Finance. The company claims challenges in various areas, including political uncertainty, a cooling global economy (partly due to international trade conflicts), rising production costs to meet regulatory requirements, exchange rate effects and rising raw materials prices are not are all playing their part in this small decrease but that measures put in place to counter them should do the trick.
The earnings before interest and taxes fell to 9.12 billion euros but were still better in the end to what analysts predicted at 8.94 billion euros. Furthermore, BMW’s return on sales for its automotive division fell to 7.2 percent compared to 9.2 percent in 2017 but that’s all due to the heavy investments done to keep up with the times. Another cost-cutting measure done by BMW was to cut the dividend from 4 euros per common share to 3.5.
Let’s hope this doesn’t mean they’re cutting corners making cars
After hearing this news, I’m almost willing to bet that BMW reached out to Toyota to sell them Engines and drive lines and not other way around. And probably on the cheap to generate more revenue. I’m doubting quality will decline, but they will need to find more sources of revenue and the Toyota deal is probably the first of many deals.
BMW have been selling engines to other manufacturers since the last century – Lincoln, Bentley, Rolls-Royce, Morgan, Range Rover, McLaren. Supra is more than BMW drivetrain, also manufactured on Z4 Magna assembly line in Austria, who have been building BMWs since original X3. BMW have doubled their model range & sales volume already this century, have forecast another 50% increase in volume, don’t think they’re struggling “to find more sources of revenue…”
I don’t think they would sell them overly cheap unless it was an extremely high volume. Toyota also needed BMW since at the time no one else made a silky smooth I6
And that’s not a bad thing. Better to maximise sales of your products especially where it can only further your brand power. BMW should try to get their engines in more cars. Aston Martin for instance, they let AMG beat them to that. In fact, they should have sought to buy and add Aston Martin to their portfolio. Makes a lot of business sense.
Since BMW have Rolls-Royce, why do they need Aston? They already sold Range Rover & own multiple moribund British labels, since Rolls & their own brand are expanding, why become over-branded VAG? SEAT sell a fraction of their potential volume, BMW contract production out to Magna.
Rolls Royce caters to uppermost segment of buyers. Aston Martin addresses a segment one or two notches below, where buyers cross-buy with Bentleys, both being “sporty ultra-luxury” brands. As you know, RR doesn’t do “sporty”. Aston would’ve been BMW’s answer to Bentley, allowing for Rolls Royce to be priced even higher for differentiation. Not to mention there’ll be more BMW V8s and V12s engines, tech/engineering transfer etc sold in Aston Martins creating more value in those divisions.
BMW Group have become #1 premium, as the brand goes up market with X7, 8 Series, 7 Series LCI, Rolls-Royce counter Bentley with Wraith, Ghost, Cullinan. Aston would be superfluous redundant overkill, their current owners are taking the brand in a different direction with their hypercars and race cars.
I think you make my point in a roundabout way. Aston is vying in different direction/segments where BMW Group cars do not currently address. They’re making cars in segments to rival Bentleys, Ferraris, McLarens, AMG One etc, all the while remaining just profitable albeit as an independent car company. Imagine the profitability it would have with the economies of scale as part of BMW Group. Another thing, all the RR cars you mentioned are one or two notches above any comparable Bentley offering. Buyers for RR do not cross-shop Bentleys anymore, huge price disparity and different classes. Everyone knows there’s a huge gap between RR and BMW’s best offering. Aston would have filled that gap (against the likes of Bentley, Ferrari, McLaren etc), and still been able to go on with their hypercar activity without depending on resources being shifted from BMW’s core brands.
I gave up on Aston when Ford ruined them, I don’t even know who the current owners are, let alone their product line-up (which remind me of Tesla, they keep announcing models I never see on the street). Your point about Bentley is valid, guess why they’re struggling, while R-R keep rising on Bespoke. Since BMW have announced they are expanding on BEV & fwd., I tend to look @ AM as an ICE anachronism, I would prefer to see them develop their own brand to fill the gap beneath R-R (esp. since Maybach & Bentley seem to be fumbling the luxury ball).
Switching to electric infrastructure will cost billions.🔥