BMW expects impact to last all year

FRANKFURT: BMW AG said yesterday that the impact of the coronavirus would likely hurt demand and profit throughout the year, forcing the German automaker to lower its profit outlook for passenger cars following a slowdown in first-quarter deliveries.

The Munich-based firm forecast its full-year automotive earnings before interest and taxes (EBIT) margin to fall to 0% to 3%, versus the 2% to 4% range estimated before demand was decimated by government restrictions on movement worldwide aimed at slowing the coronavirus outbreak.

“The BMW Group still expects the spread of the coronavirus and the necessary containment measures to seriously dampen demand across all major markets over the entire year 2020,” the automaker said.

The carmaker reported a 133% rise in first-quarter profit to €1.38 billion ($1.50 billion).

That compared with €589 million in the same period a year earlier, when the result was pulled down by a €1.4 billion provision.

Its automotive EBIT margin rose to 1.3% from -1.6%.

BMW’s outlook is the latest sign that profitability at legacy automakers is on the wane, as they spend huge sums to clean up combustion engines in the face of increasingly stringent emissions regulations as well as rising competition from electric vehicle specialist Tesla Inc.

Last week, Tesla said its automotive gross margin rose to 25.5% in the first quarter from 20.2% a year earlier, due to a 40% rise in deliveries, helped by demand for its Model Y crossover utility vehicle.

By contrast, BMW’s passenger car deliveries fell 20.6% to 477,111 cars in a quarter blighted by the impact of the coronavirus.

Margins have come under pressure as customers shifted towards buying petrol-guzzling sport-utility vehicles (SUVs) at a time when emissions rules are getting more stringent.

Sales of BMW’s “X” series of SUVs jumped 21% last year, making up 44% of the BMW brand’s global total. That has forced the automaker to increase spending on hybrid petrol-electric and pure electric vehicle technology to meet emissions rules.

Carbon dioxide emissions from new vehicles sold in the European Union must be 40% lower in 2021 compared with 2007, and 37.5% lower in 2030 versus 2021 — with fines for non-compliance.