Wednesday 20 March 2019 11:16 am

BMW flashes warning lights as mounting tech costs hit manufacturer’s forecasts

City A.M’s industry and manufacturing correspondent. You can follow me on @alexmdaniel, or email:

City A.M’s industry and manufacturing correspondent. You can follow me on @alexmdaniel, or email:

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BMW has alerted investors to a more than 10 per cent expected loss in group pre-tax profit for 2019, as the car manufacturer announced a far-reaching €12bn (£10.3bn) savings plan.

Shares fell five per cent on the news.

Last week, the firm said it would move up a gear in its efforts to cut costs in anticipation of a difficult year, after operating profit dropped 7.9 per cent last year.

Read more: BMW to make engines for Jim Ratcliffe's upcoming off-road car

The savings plan announced today is designed to counteract spiralling technology investment costs and unpredictable global markets, it said.

Volatile market conditions make it “difficult to provide a clear forecast,” BMW said, but both the threat of a no-deal Brexit and the ongoing trade stand-off between the US and China were sources of “uncertainty”.

“Depending on how conditions develop, our guidance may be subject to additional risks; in particular, the risk of a no-deal Brexit and ongoing developments in international trade policy,” chief financial officer Nicolas Peter said.

“Unfavourable currency factors and higher raw materials prices are expected to have a medium to high three-digit million negative impact,” the company added.

The firm said it expects operating margin in its core automotive division to fall between six and eight per cent in 2019, below its previous target of eight to 10 per cent. Last year, the operating margin was 7.2 per cent.

Last year’s introduction of more stringent emissions standards in the EU has prompted a decline in sales since September for car makers. BMW's rival Volkswagen’s reported sales were down 37 per cent that month, and Europe’s biggest manufacturers have continued to struggle adjusting to regulations.

Read more: BMW says it could move Mini production out of UK in no-deal Brexit

Last month the German car maker also warned production of its iconic Mini could be moved out of Britain if it leaves the EU without a deal.

Peter Schwarzenbauer, who sits on the company board and is responsible for Mini and Rolls-Royce cars, told Sky News that the car giant would "need to consider" a production move of the model from its plant in Cowley, Oxford, in the face of extra costs.

BMW provides 8,600 manufacturing jobs at four plants in the UK, 5,000 of which are based at its Mini plant in Oxford.