BMW profit margin narrows on China weakness

(Sharecast News) - BMW reported a decline in its automotive segment's profit margin for the second quarter on Thursday, driven by increased competition and weakening demand in China, a crucial market for the German carmaker. The company's earnings before interest and tax (EBIT) margin fell to 8.4%, down from 9.2% in the same period last year, and below analysts' expectations of 8.7%.

It said its sales in China, a key market, decreased 4% in the first half of the year, although it still outperformed its rivals, Volkswagen and Mercedes, in the region.

BMW said it was heavily investing in revamping its vehicle models, which contributed to the lower margins.

However, the company noted strong demand for its all-electric models, with sales of electric vehicles rising by 25% to over 190,000 units in the first half of 2024.

Despite the challenges, BMW maintained its 2024 guidance, expecting a slight decline in pre-tax earnings.

The automaker's full-year EBIT margin target for its automotive segment remained between 8% and 10%, contingent on stable geopolitical and macroeconomic conditions.

BMW said it expected the economic situation in China to stabilise in the third quarter, which could help mitigate some of the current pressures.

"The BMW Group cannot entirely escape current market and geopolitical developments," said chairman Oliver Zipse on a conference call after the results.

"However, with our long-term, yet flexible strategy, we are in the driver's seat; we adapt quickly and effectively as conditions evolve.

"We see no reason for hasty action or fundamental course adjustments."

Zipse said the company would continue on its path in the future.

"That means, sometimes we do things differently - but always out of conviction, not merely on principle.

"This is what makes us strong and successful in the long term."

At 1340 CEST (1240 BST), shares in Bayerische Motoren Werke were down 2.49% at €83.68.

Reporting by Josh White for Sharecast.com.