BMW profits drop on higher costs, spending for new tech

Luxury automaker BMW said Thursday that net profit fell 29% to 1.48 billion euros ($1.63 billion) in the second quarter from a year earlier, as profits were reduced by higher spending on revamping factories and on new technologies such as battery-only cars and smartphone-based services.

BMW spent 1.4 billion euros ($1.5 billion) on research and development in the quarter, and invested 1.2 billion euros ($1.3 billion) in new plants to modernize production and prepare for new models. It also saw higher production costs from an increasing proportion of electric vehicles and higher raw materials prices.

The company said it was able to increase its share in the key China market despite a shrinking overall market there.

The company and the auto industry as a whole are facing a double challenge: make money selling conventional cars while sinking billions into new technologies such as battery-powered and autonomous cars, and new services that don’t necessarily involve car ownership such as car-sharing and ridehailing apps.

The industry is also facing headwinds from the US-China trade conflict and from slower auto sales in China, the world’s biggest auto market. Tougher European Union limits on emissions of carbon dioxide, the primary greenhouse gas blamed for global warming, are forcing carmakers to develop electric cars even though battery-only vehicles are only a small fraction of current industry sales due to higher prices and concerns about battery range.

China is also pushing carmakers to include more electric and hybrid vehicles. (AP)