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BMW faces a dip in profits for the current quarter of 2018

Earlier on Thursday, August 2nd, BMW (BMW.XE)revealed that its earnings for the second quarter were weighed down due to a large number of investments in electric and automated vehicles, and also the recent currency effects and high raw-materials prices, however it was also revealed that the premium carmaker remained largely unfazed by new emissions rules and escalating trade disputes that have caused quite the hassle for its German peers Volkswagen and Daimler.

According to Harald Krueger, Chief Executive of BMW, he said that the car manufacturer has adapted with the changeover to a new emissions testing standard that has become quite an obstacle for fellow German rivals Volkswagen AG (VOW.XE) and Daimler AG (DAI.XE).

Mr. Krueger believes that given the company’s pole position regarding in the matter it should provide BMW with several opportunities to increase sales over the second half of 2018.

Notably, earlier in the week Herbert Diess, Volkswagen’s Chief Executive Herbert Diess issued a warned by saying that the car maker’s main obstacle this year would be of getting its cars compliant with the Worldwide Harmonized Light Vehicle Test Procedure emissions standard, or WLTP, which will be in effect in Europe from the 1st of September.

Both Daimler, as well as Volkswagen, went on to state that the new emissions rules will most probably lead to limited availability of some models and will, in turn, affect earnings.

Speaking on the matter Mr. Krueger went on to say, “Regardless of the current situation, We are able to offer our fleet customers the same wide range of products only because we had involved the WLTP switch into our production and sales quite early during our planning.

Compared to its previous year’s net profit of EUR 2.2billion, BMW said that its net profit for the period was 2.06 billion euros ($2.41 billion), down by 6.4%, also its revenue dropped by 2.9% to EUR 25.02 billion. According to a poll conducted by FactSet Analysts, they had expected a net profit of EUR 2.02 billion and revenue of EUR 25.15 billion.

Just for the automotive segment, BMW’s closely-watched EBIT margin from 10.1% to 8.6% in the current quarter.

Speaking at Evercore ISI, Arndt Ellinghorst said “In a reporting season where BMW’s peers are experiencing major volatility, this is a refreshingly clean and unspectacular result.

Given the recently updated U.S tariffs on steel and aluminum imports, Car manufacturers are facing higher raw material prices and are also facing Chinese tariffs on U.S.-made vehicles.

The Chinese levies have forced BMW to increase prices for SUVs imported to China from the U.S.

BMW’s largest plant all over the world is situated in Spartanburg, South Carolina. However, on Thursday, 2nd August,  the car manufacturer went on to reveal that nearly 80% of the vehicles it sells in China are produced locally and in order to bypass import duties it has started shipping some SUVs from Thailand.

According to Nicolas Peter, BMW’s Chief Financial Officer, he said, “All the challenges that are rising due to the current geopolitical environment are being systematically addressed by us. In our line of business, Volatility has become a compulsion.”

The premium car manufacturer continues to predict an EBIT margin of something between 8% and 10% for its automotive department. BMW also confirmed its full-year guidance, deliveries and expected revenue to marginally grow as the company targets pretax profit similar to the previous year’s.

Mr. Krueger concluded by saying, “Undoubtedly, these goals assume that economic and political conditions would not get any worse.”

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