Written by Andrei Sychev and Nick Carey
BERLIN (Reuters) – BMW said on Wednesday it expects a slight decline in pre-tax profits this year due to higher research and development, manufacturing and employee costs, with lower used car prices also contributing to the decline.
The Munich-based automaker reported a decline in first-quarter profit margin in its auto sector as persistently high costs weighed on its bottom line and demand for luxury cars in China remained weak.
The German luxury automaker's pre-tax profit margin in the automotive sector fell to 8.8% from 12.1% a year ago and below the 9.2% that analysts had expected in a consensus compiled by the company.
First-quarter revenues declined slightly despite a 1.1% increase in auto sales.
During the pandemic, shortages in the supply chain meant that automakers were able to charge higher prices for their cars and were able to sell leased cars for more due to strong demand for used cars.
BMW (ETR:) is investing heavily in electrification and model renewal across its lineup and expects record spending this year, up from €7.5 billion last year.
“This year, it will be more important than ever to maintain our strategic course,” CFO Walter Myrtle said in a statement. “The investments needed in the digital and electric future of our company are the highest they have ever been.”
BMW rivals Mercedes-Benz (ETR:) and Porsche are also spending big as the German automakers try to address growing competition in the electric vehicle market from China and Tesla (NASDAQ:).
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The group's pre-tax profits in the first quarter fell by 18.9% to 4.1 billion euros ($4.40 billion), but exceeded analysts' expectations of 3.9 billion.
All-electric vehicle sales rose 28% to 83,000 vehicles in the quarter.
($1 = 0.9313 euros)