BMW is making 15 percent less profit - and it's likely to get worse

The key driver for the decline is the poor business in China. Like all German manufacturers, BMW is suffering from the fact that the world's most important automobile market is shrinking and at the same time is characterized by increasing competition and fierce price wars. BMW lost around a quarter of its sales there.

However, the Munich-based company is not as dependent on the Chinese market as Audi, for example. In addition, they were able to offset at least part of the decline through increases in Europe and the USA, so that sales only fell by 6.3 percent. Sales fell slightly more slowly by 5.8 percent to 30.5 billion euros.

Profit warning the evening before

BMW had already issued a profit warning on the eve of the quarterly figures. It was the second in the current year and the third within 13 months. The margin in the automotive business before financial results (EBIT) is now expected to be between minus 0.5 and plus 0.5 percent for the current year. So far the forecast has been between one and three percent.

This means the company could lose money in its core business. Of all things, the success of the austerity program is to blame, the costs of which – together with other effects – are putting pressure on profitability.

The program, announced in the summer, started at the beginning of October and was closed again after less than three weeks: The interest of employees in leaving the company for a payment that was often well into the six-figure range was surprisingly high.

Previous statements show that BMW was expecting costs of a good one billion euros. Further costs arise because the Munich-based company is phasing out older models earlier than originally planned.

CFO Walter Mertl explains the burdens as an investment in the future. »Speed ​​is a success factor in our planned realignment. That's why we're intensifying measures for greater efficiency and leaner structures this year," he says. “We want to use this to strengthen our future margins.” CEO Milan Nedeljković also emphasized the importance of speed: “The development in our industry requires consistent decisions and quick implementation. We will therefore specifically intensify and accelerate structural measures.«

Less sales expected

BMW has also lowered its sales expectations. The group is now assuming a moderate decline, equivalent to 5 to 9.9 percent. So far the outlook here had been for a slight decline. This corresponds to between one and 4.9 percent.

BMW left its forecast for profit before taxes untouched. However, the group has been expecting a significant decline since the first profit warning in early summer. That would be more than 15 percent.

With its results in the third quarter, BMW performed slightly worse than its competitor Mercedes, which made a profit of 1.52 billion euros, but much better than Audi and VW.