BMW cuts back on product investments as Covid-19 crisis hits profits
Munich, Germany - BMW's profits stagnated in the first quarter of 2020, as the heavy costs on the car industry doled out by the coronavirus pandemic forced the German carmaker to significantly roll back investments.
At 574 million euros (R11.5bn), the premium carmaker's Q1 net profit is not too far off the same three months last year. However, the 2019 figures were held down by the fact that BMW had been forced to set aside 1.4 billion euros for a fine in an EU cartel probe.
Chief financial officer Nicolas Peter said that BMW would reduce its investment pot from 5.7 billion euros (R115bn) last year to less than 4 billion euros (R80.8bn) in 2020.
"In view of the current situation, we will either put certain projects on hold or subject them to further review," he said.
BMW has not stated which future products would be in the firing line, but the production version of the M Next concept, which would have replaced the i8, is reportedly being cancelled.
Despite demand for new cars plummeting globally during the ongoing Covid-19 crisis, BMW's revenues rose by 3.5 percent in the first quarter.
Earnings before interest and taxes more than doubled on the year to 1.38 billion euros - although that was also in large part due to the last year's cartel charge.
However, the company's operative margin in its core automotive segment was just 1.3 percent, according to the quarterly results. On the eve of their release, BMW revised down its target margin to 0-3 percent.
"Quite clearly, the situation remains serious," BMW board chairman Oliver Zipse said, with the worst economic effects of the coronavirus crisis expected in the second quarter.dpa