BMW Group’s operational performance on course

Within a challenging market environment, the BMW Group has started the financial year 2019 in line with expectations in operational terms. Contrary to the prevailing trend in the sector, the Group’s attractive and significantly younger model range enabled the company to set a new record in terms of deliveries to customers in the first quarter, thereby expanding its market share of the premium-segment in key regions. These positive developments were accompanied, however, by increasing downward pressure on pricing in some markets.

“The Group’s new first-quarter sales record proves that we are putting the right products on the roads, thereby attracting new customers, as well as inspiring existing clients. In operational terms, we remain firmly on course and expect business to benefit from tailwinds, especially in the second half of the year, as numerous new models become available. At the same time, we are experiencing the impact of high levels of expenditure in numerous areas affecting the entire automotive sector. In addition, it has also been necessary to recognise a provision relating to ongoing proceedings of the EU Commission,” stated Harald Krüger, Chairman of the Board of Management of BMW AG, on Tuesday in Munich. “Within this challenging environment, we will remain true to the BMW way of doing things. We are fully focused on our roadmap for future mobility and the rigorous implementation of our Strategy NUMBER ONE > NEXT”.

This means, the BMW Group is committed to implementing even faster processes and leaner structures in order to achieve greater efficiency. The aim is to make sure, the BMW Group has the financial strength required to influence and decisively shape the world of individual premium mobility moving into the next decade.

E-mobility continues to gather momentum

The BMW Group is already a leading provider of electric mobility and expects to have more than half a million of its state-of-the-art electrified vehicles on the roads by the end of the year. The broad range of electrified vehicles offered by the BMW Group remained highly popular throughout the first three months of 2019. Deliveries of the BMW i3 continued their upward trend, climbing by 16.2% to 9,227 units compared to the same three-month period one year earlier. These figures represent by far the most successful first quarter for the innovative BMW i3 since its launch in 2013.

The BMW Group’s plug-in hybrid vehicles are also in high demand. For instance, more than a quarter of all BMW 2 Series Active Tourers delivered to customers are electrified, while almost 20% of all MINI Countryman sold are equipped with a plug-in hybrid drivetrain. In Norway, one of the world’s leading markets for electrified vehicles, all-electric and plug-in hybrid vehicles now account for around three quarters of all BMW and MINI deliveries.

At the beginning of March, the revised plug-in hybrid versions of the BMW 3, BMW 7 and BMW X5 Series as well as the new BMW X3 with their extended electric range were showcased at the Geneva Motor Show. In April, the revised plug-in hybrid version of theBMW X1 was launched in Shanghai as an extended-wheelbase version produced locally for the Chinese market. By the end of the coming year, the BMW Group will have more than ten new or revised models equipped with fourth-generation (“Gen 4”) electrified technology on the market.

From the end of 2019, these will include the all-electric MINI Electric manufactured at the Oxford plant and, from 2020, the BMW iX3, which will be produced in Shenyang, China for the world market. Together with the pioneering BMW i3, the BMW i4 and the BMW iNEXT, the Group will have five all-electric models on the market by 2021 and the number is scheduled to rise to at least twelve models by 2025. Including the rapidly growing range of plug-in hybrids, the BMW Group’s product portfolio will then comprise at least 25 electrified models.

Openness to new technologies is key

“Openness in technology is a prerequisite in order to meet the various regulatory and customer requirements in different markets. This is especially true given that the introduction of alternative drivetrains is progressing at a different pace in the various regions of the world,” emphasised Krüger. “Technological openness also means that we will continue to improve the efficiency of our combustion engines, while also pushing forward our e-mobility strategy with both all-electric vehicles and plug-in hybrids and investing in new technologies such as fuel cells,” he continued.

On its way toward securing the mobility of the future, the BMW Group incurred substantial upfront expenditure in the first quarter 2019. As expected, expenditure in this area once again exceeded the previous year’s high level. First-quarter research and development expenses totalled € 1,396 million, 8.4% up on the previous year. Investments in property, plant and equipment climbed by more than one third to € 999 million (2018: € 734 million; +36.1%). The increase mainly related to the modernisation and flexibilisation of plant structures as well as the construction of the Group’s new plant in Mexico. The high proportion of electrified vehicles also contributes to higher manufacturing costs. Unfavourable exchange rate factors and higher raw material prices also had a dampening effect on earnings in the period from January to March 2019. An expense of approximately € 1.4 billion was recognised for a provision on the basis of the Statement of Objections received from the EU Commission in connection with ongoing antitrust proceedings. This provision reduced the Automotive segment’s EBIT margin by approximately seven percentage points compared to the previous year’s first quarter.

BMW Group to contest EU Commission allegations 

As communicated on 5 April 2019, the provision was recognised on the basis of the Statement of Objections, which leads the BMW Group to conclude that it is probable that the EU Commission will issue a significant fine. In accordance with International Financial Reporting Standards, the situation triggers a requirement to recognise a provision. The review of the Statement of Objections and the inspection of related files will take some time. As a result, it is not currently possible to fully evaluate the financial outcome. However, the BMW Group has made it clear that if necessary it will contest the EU Commission’s allegations with all the legal means at its disposal.

The BMW Group regards these proceedings as an attempt to equate the permissible coordination of industry positions regarding the regulatory framework with unlawful cartel agreements. Based on current knowledge, the EU Commission is investigating whether German automobile manufacturers cooperated in technical working groups to restrict competition in the development and rollout of emission-reduction technologies. From the BMW Group’s perspective, this situation cannot be compared with cartel investigations relating, for example, to territorial or price-fixing agreements.

Fundamentally, the participating engineers from the manufacturers’ development departments were concerned with improving exhaust gas treatment technologies. Unlike cartel agreements, the whole industry was aware of these discussions, which did not involve any so-called secret agreements and did not intend any detriment to either customers or suppliers in any shape or form.