BMW Expects Relatively Stable Car Unit Profitability, Lower Group Margin — Update

By David Sachs

BMW Group expects a stable margin for its key automotive division this year but forecasts a lower group margin as used-car demand falls and investments peak.

The German luxury-car maker, which released 2023 earnings last week, said Thursday that its automotive segment--BMW, Mini, and Rolls-Royce--will experience a slight increase in demand this year as new models reach the market. However, depreciation related to Chinese joint-venture Brilliance Automotive will damp gains, BMW said.

As a result, BMW expects the key division's margin on earnings before interest and taxes to finish 2024 between 8% and 10%, in line with last year's result of 9.8%.

The company also expects its group EBIT margin to finish between 8% and 10%--down from 11% last year. Group EBIT will fall slightly this year from 18.48 billion euros ($20.18 billion), as its financial services division grapples with lower demand in the used-car market that will sap leasing revenue, BMW said. Electrification and digitization investments will also weigh on the result but are expected to peak this year.

The company expects free cash flow for its automotive unit at over EUR6 billion, down from 6.94 billion last year.

BMW presented a caveat to expectations as the EU investigates Chinese subsidies for carmakers that could result in tariffs and trade wars.

"Growing uncertainty around macroeconomic and geopolitical conditions could cause economic performance in some regions to deviate from the expected trends and developments," BMW said. "This concerns trade and customs policy, security policy and possible intensification of international trade disputes."

As a group, fully-electric vehicles will comprise more of BMW's sales this year, the company said.

Write to David Sachs at david.sachs@wsj.com

(END) Dow Jones Newswires

March 21, 2024 03:40 ET (07:40 GMT)

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