BMW profit dives on back of weak China sales and brake issues

BMW on Wednesday reported a 61% drop in its third-quarter profit that missed analyst expectations because of slumping China sales and brake problems, but said it was on track to meet its adjusted full-year financial outlook.

BMW CEO Oliver Zipse said after “extraordinary challenges in the third quarter, in the fourth quarter we are back on track for stronger earnings to achieve our annual targets.”

Shares in the company were indicated to open 3.1% lower at 7.37am GMT, the weakest among German car stocks, with Zipse saying conditions in China remained challenging “and that applies to all market participants”.

BMW lowered its guidance for the year in September citing sluggish Chinese demand and problems with a braking system supplied by Continental.

In October, the premium German carmaker reported its third-quarter sales in China had fallen by a third.

Rival German carmakers Volkswagen and Mercedes-Benz are also struggling with falling sales in China amid a weak economy and intense competition.

BMW said in September the brake issue affected more than 1.5-million cars, with delivery delays expected for about 320,000 vehicles.

The company said on Wednesday it will hand those delayed vehicles to customers in the fourth quarter.

BMW posted an operating profit of €1.7bn (R32.18bn) for the third quarter, down 61% from the €4.35bn (R82.69bn) in the same quarter last year. Analysts had expected an operating profit of €1.8bn (R34.20bn).

The carmaker's revenue fell 15.7% to €32.4bn (R572.80bn) from €38.46bn (R679.93bn) a year earlier, below analyst expectations of €34.3bn (R606.23bn).

The company said it is still on track for a 2024 operating profit margin of between 6% and 7%. In the third quarter, BMW's operating profit margin for its automotive segment came in at just 2.3%.

BMW CFO Walter Mertl said “with stringent management” BMW Group “remains on track” to hit its 2024 auto free cash flow target.

“In the fourth quarter, sequentially higher deliveries and a stronger product mix will support our earnings.”