BMW Group sets strategic course under challenging conditions

In the course of a challenging financial year 2018, the BMW Group made important strategic decisions set to secure its long-term success. As part of the company’s  Strategy NUMBER ONE > NEXT, the green light was given to launch a new product offensive in the upper luxury class and the cornerstone was laid for additional expansion of the company’s presence in China, the world’s largest automobile market. With the BMW Vision iNEXT, the Group also presented its new technology flagship, which integrates the key future-oriented topics of autonomous driving, connectivity, electrification and services (ACES). The BMW Group continues to systematically broaden its range of electrified models and is increasingly focusing on co-operations in the fields of mobility services and autonomous driving. At the same time, especially during the second half of the year, business performance was impacted by significant challenges relevant to the entire sector, and which are expected to accompany the BMW Group beyond 2018.

“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 on Friday. “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.”

Alongside the challenges facing the entire industry over the past year, from the BMW Group’s perspective, ongoing international trade conflicts also contributed to a tightening market situation and greater uncertainty. Moreover, the shift to the new WLTP test cycle caused significant supply distortions on several European markets, leading to unexpectedly intense competition. 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. “This is why we launched our Performance > NEXT programme back in 2017 with the aim of optimising performance, improving structural efficiency and reducing complexity wherever possible. In view of current developments, we intend to further broaden and significantly intensify these efforts.”

The BMW Group currently sees 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. To counteract these negative factors, measures already in place to reduce product portfolio complexity are being expanded and also applied to model derivatives. For example, despite a good level of demand, no successor model will be developed for the current generation of the BMW 3  Series Gran Turismo.

In view of the ongoing model offensive, the BMW Group anticipates further volume growth in the current financial year 2019 and is targeting a slight increase in the number of deliveries to customers. New models such as the BMW X7 and the seventh generation of the BMW 3 Series are expected to provide fresh impetus. The BMW 3 Series model change is likely to dampen growth during the first half of the year.