The slowdown in European markets has adversely affected profits of BMW as the company has reported a fall in Q1 net profits to the tune of 3% to €1.31 billion. Revenues too dipped 4.1% to €17.54 billion. BMW along with Mini and Rolls Royce sold a total of 448,200 units across the globe as compared to 425,528 cars sold in Q1 2012.
Sales were up 5.3%. While the company does not expect to see any significant growth over the next few months following severe economic constraints in European markets. However, sales in other markets ensured that BMW commenced the year on a favorable note. Achievement of new sales volume record in the Q1 period has ensured that the company maintained revenues and earnings at relatively high levels which should work in favor of retaining total annual profits at last year’s levels.
Strong sales were reported in Chinese and US markets which have compensated for setbacks across Europe. Sales for BMW India have been lower than last year with 2013 Q1 accounting for 1410 cars sold as compared to 2,369 units sold in Q1 2012 equating to 40.5% sales decline. Overall, auto sales in Europe dipped in March 2013 yet again which means the auto industry has been in a slump for 1 and a half years. There is also no indication of any turn around in the near future and economic constraints in Europe have also affected auto makers such as Daimler and Volkswagen who have also reported a fall in Q1 profits.
Norbert Reithofer, the Chairman of the Board of Management of BMW AG said, “Despite the current weakness of car markets in Europe, the BMW Group has made a good start to the new financial year 2013. We achieved a new sales volume record for a first quarter. And despite high expenditure on new technologies and challenging market conditions worldwide, we managed to keep revenues and earnings at high levels. At 9.9%, the operating margin in the Automotive segment for the three-month period was at the top end of the return corridor we aspire to achieve on a sustainable basis.”
He added, “We do not expect to receive a great deal of impetus from most European markets over the next few months and economic conditions in these areas are likely to remain challenging.” “Due to high levels of expenditure for new technologies and models as well as investment in the production network, we expect to report Group profit before tax for 2013 on a similar scale to 2012.”
In regards to BMW profits falling, Christian Stadler, a car industry analyst and Associate Professor of Strategic Management at Warwick Business School said, “BMW profits are falling but not everthing is bleak for them – quite the opposite. Profits might not be as high as last year but they are still at a healthy £1.1bn. This is no small achievement when we consider how tough the European market is at the moment. Strong sales in the US and China in particular gives BMW confidence that annual performance will not suffer much.
He added, “The car industry is suffering just as the European economy is suffering. There are firms bucking the trend like Jaguar Land Rover who are positioned well in the emerging markets and you see that those high-end brands aimed at richer customers are not doing as badly. If you look at Germany, BMW is not doing as badly as Volkswagen. Car firms positioned in this way will be able to avoid the worst of the European slowdown.”