BMW strikes downbeat tone for 2019 as profit falls

By BLOOMBERG

MUNICH • BMW AG sketched a cloudy start for the autos sector next year, saying its business will need to prepare for challenges ranging from trade wars to Brexit fallout and the task of meeting tightening regulation on emissions.

The world’s second-biggest luxury carmaker reported third-quarter (3Q) earnings that missed expectations, striking a somber tone that contrasted with rivals Mercedes-Benz owner Daimler AG and Volkswagen AG.

Both have forecast a recovery during the 4Q from clearing vehicle inventory and maintaining sales momentum in China.

It’s too early to say whether things will look up in 2019, with the company preparing for trade wars, costs from Brexit, and “regulatory challenges”, CFO Nicolas Peter told reporters on a call. “How much of that can be passed on to consumers is a big question mark.”

Return on sales from automaking, a key profit measure, nearly halved during the 3Q, hit by trade tensions, higher provisions and pricing pressure.

BMW, whose MINI and Rolls- Royce brands are made in the UK, is preparing for the UK leaving the European Union without an exit deal in place, CEO Harald Krueger said.

During the 3Q, the company also had to set aside more funds to deal with recalls of fire-prone vehicles and other warranty claims. A global campaign to exchange certain engine modules contributed to a boost in provisions by €679 million (RM3.23 billion).

“Along with the rest of the industry, we are increasingly confronted with adverse external factors, the negative impact of which cannot be fully offset,” Peter said, adding lucrative models such as the revamped X5 SUV and X7 full-size SUV will help boost returns next year.