BMW lowers 2020 margin outlook for its auto division

BMW lowers 2020 margin outlook for its auto division

BMW is lowering its profit outlook for its car and motorcycle divisions, attributing the revision to worse-than-expected demand caused by measures to contain the novel coronavirus.

The Bavarian automaker told Reuters that its earnings before interest and taxes (EBIT) margin for the automotive segment could fall to within 0% and 3% this year (down from 2% and 4%), and the motorcycle segment will be between 3% and 5% (down from 6% and 8%).

“The decisive factor for the adjustment is that the measures to contain the coronavirus pandemic are lasting longer in several markets and are thus leading to a broader negative impact than was foreseeable in mid-March,” BMW said.

BMW lowers 2020 margin outlook for its auto division

Furthermore, delivery volumes in these markets have not rebounded as BMW had earlier assumed, and it now warns that the situation could get worse. In fact, BMW expects motorcycle deliveries to fall significantly from the levels it achieved in 2019.

Overall, BMW said its pre-tax profit and vehicle deliveries would drop considerably this year as the coronavirus spreads, and the combined effect of higher research and development spending would lower its profit margins in the automotive sector.

Additional pressure could also come from market distortions caused by an intensifying competitive environment post-lockdown, or from a second wave of infections and the associated containment measures. BMW is expected to publish its first quarter earnings soon.

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Matthew H Tong

An ardent believer that fun cars need not be fast and fast cars may not always be fun. Matt advocates the purity and simplicity of manually swapping cogs while coping in silence of its impending doom. Matt's not hot. Never hot.


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