After losing the title of the world’s biggest seller of luxury cars to Mercedes-maker Daimler last year, BMW warned investors it will take a bit longer to get back in the game.
The Munich-based group said Tuesday its third quarter operating profit fell 3 percent as heavy investments in electric cars and self-driving technology weighed on earnings. The operating earnings and margin of its car business came in at €1.8 billion ($2.1 billion) and 8.3 percent, respectively, behind Mercedes-Benz Cars’ figures of €2.1 billion and 9.2 percent.
BMW tried to reassure investors by saying it was on the brink of the greatest rollout of new models in its history and noted that it spent €1.5 billion more on investment, research and development in the first three quarters than in the previous year. Chief Financial Officer Nicolas Peter said BMW will have to keep up that momentum for at least three years to take the lead in the auto technologies of the future. But until it starts earning real money with electric and autonomous cars, it has to keep up in the conventional car market, where it’s been falling behind in Europe and the US.
It’s pinning its hopes on the new 5 Series mid-size luxury car, which will be available in all markets by the end of the year, and on the expansion of its SUV range starting with the new X3. Demand for the previous version of the compact SUV was higher than expected so BMW is building it in the US, South Africa and China. It also plans to ramp up production of the new X1 SUV and its sporty X2 version before launching production of the mighty X7 in the US at the end of 2018.
The rollout is aimed at enabling BMW to sell more cars without having to offer discounts. They need to sell because BMW must generate profits from conventional cars to fund its reinvention as a high-tech company, offering electric and self-driving cars as well as mobility services, such as its car-hire services DriveNow and ReachNow.
BMW is also expanding its range of electric models, launching a completely new generation of electric cars from 2020 with ranges of more than 700 kilometers. They include the “BMW i Vision Dynamics,” a sleek four-door electric coupe — BMW unveiled a study at the IAA Motor Show in Frankfurt in September, part of the automaker’s plan to halt US rival Tesla’s march into the middle class segment.
In the meantime, BMW remains highly dependent on the sale of diesel cars, which have been under fire and on the retreat ever since the revelation of VW’s emission-cheating scandal two years ago. In Europe, 68 percent of BMW vehicle sales are diesel models. If the technology were to be phased out abruptly or fall further in popularity, BMW would suffer. Investors will be closely watching the sales figures of the new diesel models.
Markus Fasse specializes in aviation and automobile industry news and works from Handelsblatt’s Munich office. To contact the author: firstname.lastname@example.org