Andrey Sychev and Nick Carey
BERLIN (Reuters) – BMW said on Wednesday it expects pre-tax profit to decline slightly this year due to rising costs in research and development, manufacturing and personnel, with lower used car prices also contributing to the decline.
The Munich-headquartered automaker reported a fall in first-quarter profit in its auto segment as rising costs weighed on its profits and demand for luxury cars remained weak in China.
The German premium automaker’s pre-tax auto segment margin fell to 8.8% from 12.1% a year earlier and below the 9.2% analysts expected according to the company’s consensus.
Revenue fell slightly in the first quarter, despite auto sales rising 1.1%.
During the pandemic, supply chain shortages meant automakers were able to charge higher prices for their vehicles and sell cars coming off leases at a higher price due to high demand for used vehicles.
BMW (ETR:) is investing heavily in electric vehicles and model upgrades across its range and expects record spending this year, up from 7.5 billion euros last year.
“This year it will be more important than ever to maintain our strategic direction,” Chief Financial Officer Walter Mertle said in a statement. “The investment required in our company’s digital and electrical future is the highest ever.”
BMW rivals Mercedes Benz (ETR:) and Porsche are also spending big as German automakers try to cope with growing competition in the electric vehicle market from China and Tesla (NASDAQ:).
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The group’s first-quarter pre-tax profit fell 18.9% to 4.1 billion euros ($4.40 billion), but beat the 3.9 billion expected by analysts.
Sales of all-electric vehicles rose 28% to 83,000 vehicles in the quarter.
($1 = 0.9313 euros)