Munich - BMW’s profit declined 2.5 percent in the first quarter on investment in new technologies like self-driving cars to defend its status as the world’s biggest maker of luxury vehicles.
Earnings before interest and taxes slipped to 2.46 billion euros ($2.84 billion) from 2.52 billion euros a year earlier, the Munich-based manufacturer said on Tuesday in a statement. The figure fell short of the 2.52-billion-euro average of eight analyst estimates compiled by Bloomberg.
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“BMW’s investments in future technologies continue to be high, but they’re generating the necessary free cash flow to do that,” said Arndt Ellinghorst, a London-based analyst with Evercore ISI. “They need to innovate to keep up with everybody else.”
BMW is adapting to mounting competition from established rivals such as Mercedes and newcomers like Tesla Motors as growth slows because of an ageing lineup. Amid plans for a self-driving, electric car to eventually supplant the 7-Series sedan as its flagship model, the company is seeking to regain an edge as Mercedes boosted deliveries twice as fast as BMW in the first quarter. The Munich-based automaker plans to finance its spending on new technology by rolling out more high-performance M models as well as a full-size sport utility vehicle.
BMW’s shares fell 2.2 percent to 79.31 euros at 9.13am in Frankfurt. The stock has tumbled 19 percent this year, valuing the company at 51.5 billion euros.
BMW stuck to its forecast for a slight rise in full-year pretax profit, as growth in global auto markets offsets “high levels of upfront expenditure for new technologies, intense competition and rising personnel expenses”, the company said. First-quarter pretax profit rose 4.4 percent to 2.37 billion euros.
The maker of BMW, Mini and Rolls-Royce vehicles is aiming for its highest-ever sales in 2016, which would be its seventh record in a row. The battle for growth will become stiffer as the year goes on. Daimler AG’s Mercedes started selling the newest version of its E-Class business sedan in March. BMW’s competing 5-Series isn’t due for a refresh until 2017.
Still, BMW managed to keep ahead in profitability in the first quarter, as Mercedes spent on its growth push. BMW’s automaking margin of 9.4 percent of revenue beat the 7 percent posted by its closest rival.
“The decisive factor for us is not short-term profit but sustainable, profitable growth,” Chief Executive Officer Harald Krueger said in the statement. “We intend to play a pioneering role in transforming and shaping the world of individual mobility going forward.”
BLOOMBERG