Luxury carmaker BMW starts to feel pain despite rise in profits

 
City A.M. Reporter
BMW, the world’s largest premium carmaker, warned yesterday it was starting to feel the pain of a sickly European market, overshadowing strong quarterly results and a forecast record annual profit.

Chief executive Norbert Reithofer said conditions were weakening, after the German company posted a 14 per cent rise in third-quarter profit that beat analysts’ forecasts.

“Like the rest of the sector, we are now beginning to feel some headwind,” Norbert Reithofer said in a statement, which BMW put down to “intense competition” – an industry term for rising levels of incentives to attract customers such as low interest-rate financing and cheap leasing deals.

For example, BMW offers leasing conditions on its revamped 3 Series that effectively equate to 26 per cent off the list price in Germany, according to the CAR think tank.

Earnings before interest and tax (Ebit) rose 14 per cent to €2bn, exceeding the €1.72bn forecast, due to strong demand in China.

BMW reiterated its full-year forecast for record pre-tax profit and an Ebit margin, an important industry benchmark, in its core Automobiles division at the upper end of its target range. The cars division Ebit margin narrowed to just 9.6 per cent from 11.9 per cent a year ago and below expectations of 9.9 per cent.