Fri, May 05, 2017 - Page 11 News List

BMW maintains a cautious outlook

RISING EXPENSES:Research-and-development costs jumped 35% to 1.32 billion euros in the first quarter, hurting return on sales, which fell to 9% from 9.4%

Bloomberg

Visitors look at a BMW 5 Series vehicle displayed at Auto Shanghai at the National Exhibition and Convention Center in Shanghai, China, on April 19.

Photo: AP

BMW AG yesterday stuck to a conservative profit forecast as chief executive Harald Krueger seeks patience to push through a transition to self-driving, electric cars.

While rival Daimler AG upgraded its target to a “significant” gain this year, BMW kept its goal of a “slight” increase in earnings, according to a statement from the Munich-based company.

BMW is to focus on its higher-end models in the coming years, including a new X7 sport utility vehicle (SUV), as it covers the steep costs of developing the vehicles of the future.

“We expect start-up and marketing costs regarding new models to increase over the course of the year,” BMW chief financial officer Nicolas Peter said in the statement, noting that spending on electric technologies and autonomous features would also be high. “Short-term gain is not the decisive factor for us: we remain focused on sustainable, profitable growth.”

Weighed down by rising expenses, BMW has maintained a cautious approach even after Daimler’s Mercedes-Benz surged past it in sales last year for the first time in more than a decade.

The first steps of BMW seeking to fight back were evident in March, when Krueger outlined plans for 40 new and revamped models.

The offensive includes the X2, a compact sport utility vehicle scheduled for next year, as well as the full-size X7.

Selling more of the lucrative SUVs and top-of-the-line sedans — alongside the revamped bread-and-butter 5 Series — is vital as the manufacturer aims to boost profitability.

BMW’s new flagship, the self-driving electric iNext, is due for release in 2021.

The company’s profit from automaking rose 6.1 percent in the first quarter to 1.87 billion euros (US$2 billion) on the back of climbing sales, the automaker said in the statement, describing the growth as “significant.”

“Despite this stronger-than-expected start to the year, BMW has opted for a conservative approach,” Natixis Securities analyst Georges Dieng said. “We think there was room for a more upbeat message.”

Research-and-development costs jumped 35 percent to 1.32 billion euros during the quarter. That hurt return on sales, which fell to 9 percent from 9.4 percent a year earlier.

Unlike its competitors, BMW has chosen to add electric power trains to existing models rather than design specific electronic vehicles. The company says that approach puts it in a good position to react to changes in demand, as consumers to date have not shown much enthusiasm for “green” technology.

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