Frankfurt: German luxury automaker BMW saw net profit slip 1 per cent in the second quarter amid higher launch costs for new vehicles and a tougher market in China, a major pillar of its profits.
The company said Tuesday that net profit fell to €1.75 billion ($1.92 billion) from €1.77 billion in the April-June quarter of last year.
Munich-based BMW AG also said it sold a less profitable product mix containing more compact cars, which typically earn less per vehicle.
The profit margin before interest and taxes, a key earnings figure, fell to 8.4 per cent in the quarter from a strong 11.7 per cent in the year-ago quarter.
Analysts say key BMW models such as the 5 Series and 7 Series sedans are nearing the end of their life cycle, which can hurt sales as customers see newer products from competitors. The company has already unveiled a new 7 Series, which will go on sale this fall.
Renewing models is costly but pays off if the new version sells better than its competitors. BMW faces tough competition for luxury car sales from Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi.
The company also cautioned that the Chinese market — a source of rich profits for German carmakers in the past several years — is “normalising” and becoming more competitive. BMW sales there slipped 1.4 per cent in the quarter. Chinese economic growth has slowed in recent months.
Overall, BMW sales boomed 20.2 per cent to €23.935 billion, thanks to record numbers of vehicles sold around the world but also strongly boosted by currency exchange rate shifts.
