Munich
BMW AG lost ground to global luxury-car leader Mercedes-Benz, reducing its forecast for automotive revenue after reporting weaker profit margins and slower sales growth in the third quarter.
The manufacturer is now predicting a “slight” gain in auto revenue, compared with its previous forecast for a “solid” increase, the Munich-based company said Tuesday in a statement. BMW’s automotive profit margin slipped to 8.3 per cent, below the 9.2 per cent at Mercedes, which included charges for airbag recalls and diesel fixes.
BMW is struggling to regain momentum in its tussle with Mercedes over the lead in the global luxury-car market. In addition to spending to develop upscale models like the 8-Series coupe and full-size X7 sport utility vehicle, BMW is investing to accelerate a roll-out of at least 12 battery-powered vehicles by 2025 in a race with Mercedes’s 10 billion-euro ($11.6 billion) electric-car push.
“Significant upfront investment on research and development is necessary, both now and in the coming years,” Chief Financial Officer Nicolas Peter said in the statement.
Despite the spending pressure, BMW raised its full-year earnings forecast and now expects to post a “solid” increase in pretax profit, compared with its earlier prediction of a “slight” gain. Third-quarter earnings before interest and taxes fell 3.2 per cent from a year earlier to lag behind analyst estimates, and the margin on carmaking narrowed.
“BMW’s quarterly performance was weakish, and the boost to the overall guidance largely feeds from a strong first-half of the year,” said Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt. “Compared to its key competitors, the result was less strong.”
BMW shares fell 2.2 per cent to 88.02 euros at 9:33am in Frankfurt trading. The stock has slipped 0.8 per cent so far this year, while Mercedes parent Daimler AG has gained 3.2 per cent.
