The BMW Group invested substantially in the mobility of the future during the first half of the year, while at the same time firmly continuing on its course of profitable growth.

Rigorous implementation of the group’s Strategy Number One > Next is playing a key role, as the company shapes the transformation of the automotive sector. Driving this process forward, the BMW Group always remains focused on the needs and desires of its customers and is continuing its ground-breaking work on the four ACES (Autonomous, Connected, Electrified and Services/Shared) topics, said a statement from the company.

The BMW Group has also set a decisive course for its future in China, the company’s largest growth market, it said.

“We continue to focus on following our own path and remain firmly on course. We are consistently preparing ourselves to meet the demands of tomorrow. This approach enables us to remain a reliable partner – all the more important during challenging times,” said Harald Krüger, chairman of the board of management of BMW, in Munich, Germany.

“The group has more than 100 years of experience in dealing with volatility in a changing world. Our vision remains clearly on long-term prospects. It is crucial that we remain focused on the key issues of profitability, growth and innovation to ensure our competitive edge going forward,” he added.

As planned, this year the BMW Group has significantly increased its upfront expenditure on future mobility. Research and development expenses over the first six months of 2018 were more than €300 million ($341.5 million) higher than in the corresponding period one year earlier and totalled €2.61 billion ($2.96 billion) (+13.6 per cent). As previously reported, full-year R&D expenses are likely to reach up to seven per cent of group revenues in the current year (2017: 6.2 per cent), said a statement.

In addition to ramping up production to drive the new model offensive, the BMW Group is focusing on expanding its activities in the fields of electric mobility and autonomous driving. In both cases, the BMW iNext will serve as a technological spearhead that sets new standards. It will be presented to the public as a vision vehicle during the second half of 2018 and will be built at the Dingolfing plant from 2021 onwards. This underlines the significance of Germany as a key location for future technologies and a centre of competence for electric mobility.

Over the past few weeks, the BMW Group has also taken numerous steps to expand its footprint and the scale of its commercial success in China. The BMW Group and Brilliance Automotive Group have agreed to further expand their joint venture BMW Brilliance Automotive (BBA) and, from 2020 onwards, to export the all-electric BMW iX3 (which will be manufactured by BBA) to markets outside of China.

As previously stated, the BMW Group welcomes China's commitment to a further opening of its markets and initiating reforms by lifting the foreign shareholding limit for automotive joint ventures for passenger vehicles as from 2022. However, it remains the BMW Group's policy not to comment publicly on ongoing discussions with partners.

In addition to expanding the BBA joint venture, the BMW Group has signed an agreement with the Chinese manufacturer Great Wall Motor to produce electric MINI vehicles in China through a mutual 50:50 joint venture. As well as electric MINI vehicles, the "Spotlight Automotive Limited" joint venture will also produce electric vehicles for Great Wall Motor. The establishment of the new company is subject to approval by the relevant Chinese authorities and the finalisation of business registration procedures.

The BMW Group is also investing in Europe, adding a new plant in Hungary to its existing production network and thereby maintaining a good balance in terms of global manufacturing between Asia, America and Europe.

“The decision to construct this new plant highlights the BMW Group's prospects for growth,” said Krüger. “This new location will also produce vehicles powered by combustion engines and electrified drivetrains on the same production line.”

The BMW Group is developing worldwide into a mobility tech company and systematically expanding its expertise and capacities in the field of software development. To this end, during the second quarter the BMW Group signed an agreement with Critical Software to form a joint venture called Critical TechWorks, subject to examination and approval by the relevant antitrust authorities.

The BMW Group’s stake in Critical TechWorks secures access to the know-how and skills of a highly successful European software development company, whose locations in Lisbon and Porto are witnessing dynamic growth in this sector. Meanwhile, the BMW Group continues to increase the number of people engaged in IT and software development in Germany and at its many other facilities around the world.

The BMW Group has pioneered electric mobility and followed this path resolutely ever since the market launch of the BMW i3 almost five years ago. Following the launch of the new BMW i8 Roadster, the BMW Group’s product range now includes ten electrified models. The number of electrified BMW and MINI vehicles delivered since the beginning of the year has increased to 60,660 units (+42.5 per cent), underlining the BMW Group’s position among the world's leading providers of premium e-mobility.

“We are delivering on our promise of more than 140,000 electrified vehicles this year,” said Krüger. Furthermore, production of the battery-electric MINI will begin at the Oxford plant at the end of 2019, followed in 2020 by the all-electric BMW iX3, which will be manufactured in Shenyang, China. Together with the BMW iNext and the BMW i4, the BMW Group is set to have 25 electrified models on the roads by 2025, half of which will be all-electric.

A successful and sustainably profitable core business continues to form the backbone of the BMW Group. "We always see challenging conditions as an opportunity to leverage our competitive edge to the best advantage. A clear focus and high flexibility are our response to an environment characterised by dynamic change," commented Nicolas Peter, member of the board of management of BMW, Finance.

“We are endeavouring to ensure that the group remains profitable on a sustainable basis. The company’s financial strength and its position as the world’s most profitable manufacturer enable us to achieve our aims. These fundamental qualities guarantee our ability to shape tomorrow's mobility with our own resources – even in times of volatility,” he said.

The automotive segment generated free cash flow of €1.944 billion ($2.21 billion) during the first six months of the year (2017: €2,035 million ($2.31 billion); -4.5 per cent) and continues to target a figure in excess of three billion euros for the full year.

Deliveries of BMW, MINI and Rolls-Royce premium brand vehicles increased by 1.8 per cent to 1,242,507 units (2017: 1,220,819 units) during the first half of the year. Group revenues amounted to €47.717 billion ($54.36 billion) (2017: €49,691 million ($56.61 billion); -4.0 per cent). Adjusted for currency effects, revenues were at a similar level to the previous year (-0.3 per cent). In view of the significantly higher upfront expense incurred for research and development activities, profit before financial result (EBIT) amounted to €5.479 billion ($6.24 billion) (2017: €5,753 million ($6.55 billion); -4.8 per cent). The financial result for the six-month period benefited from the contribution of €444 million ($505.9 million) (2017: €342 million ($389.6 million)) made by the BBA joint venture in China. Profit before tax (EBT) amounted to €6.038 billion ($6.87 billion) (2017: €6,238 million ($7.10 billion); -3.2 per cent). The EBT margin for the group came in at 12.7 per cent (2017: 12.6 per cent). Group net profit amounted to €4.383 billion ($4.99 billion) (2017: €4.491 billion ($5.11 billion); -2.4 per cent).

Second-quarter deliveries edged up by 0.7 per cent to 637,878 units (2017: 633,582 units). Group revenues for the three-month period totalled €25.023 billion ($28.52 billion) (2017: €25.765 billion ($29.37 billion); -2.9 per cent, currency adjusted +0.1 per cent). Profit before financial result (EBIT) finished at €2.746 billion ($3.130 billion) (2017: €2.932 billion ($3.34 billion); -6.3 per cent) due to a significant increase in upfront R&D expenditure. Profit before tax (EBT) amounted to €2.873 billion ($3.275 billion) (2017: €3.058 billion ($3.48 billion); -6.0 per cent). The EBT margin came in at 11.5 per cent (2017: 11.9 per cent), above the target of 10 per cent set for the group. Group net profit amounted to €2.082 billion ($2.373 billion) (2017: €2.217 billion ($2.52 billion); -6.1 per cent).

Six-month revenues for the automotive segment totalled €41.518 billion ($47.32 billion) (2017: €42.166 billion ($48.061 billion); -1.5 per cent; currency adjusted +2.4 per cent). Segment EBIT amounted to €3.800 billion ($4.33 billion) (2017: €4.121 billion ($4.69 billion); -7.8 per cent), resulting in an EBIT margin of 9.2 per cent (2017: 9.8 per cent). Profit before tax for the six-month period amounted to €4.343 billion ($4.94 billion) (2017: €4.676 billion ($5.32 billion); -7.1 per cent).

At €22.192 billion ($25.29 billion), second-quarter automotive segment revenues were at a similarly high level to the previous year (€22.165 billion ($25.27 billion); +0.1 per cent, currency adjusted +3.2 per cent). In addition to considerably higher R&D expenses, second-quarter EBIT was also negatively impacted on a low- to mid-three-digit million-euro scale by exchange-rate effects and higher raw materials prices.

To a large extent additional costs were offset by efficiency improvements. Overall, EBIT for the three-month period amounted to €1.919 billion ($2.18 billion) (2017: €2.244 billion ($2.55 billion); -14.5 per cent), resulting in an EBIT margin for the automotive segment of 8.6 per cent (2017: 10.1 per cent), which lies within the unchanged target range of between 8 and 10 per cent. Profit before tax reached €2.062 billion ($2.350 billion) (2017: €2.391 billion ($2.75 billion); -13.8 per cent).

The excellent second-quarter sales performance means that the BMW Group has now recorded growth in 35 consecutive quarters. The ramp-up of production of the BMW X3 in China and South Africa will enable the BMW Group to meet the high market demand for its coveted X models. This increased availability means the company expects sales growth to accelerate during the second half of the year, it stated. – TradeArabia News Service