BMW profits down 78% amid €1.4bn provision for EU fine

( via– Tue, 7th May 2019) London, Uk – –

As BMW updates investors on its challenges, the UK car industry reveals flat sales this year so far when Mini is combined.

By James Sillars, business reporter

BMW warned it expects annual profits to be down on 2018 as it booked a hefty provision to cover the cost of a fine from the EU Commission.

The German carmaker reported a 78% decline in operating profits during the first quarter.

They came in at €589m (£503m).

BMW said the decline partly reflected the costs of converting factories to make electric cars – with such investment rising 36% on the same period last year.

But it also booked a €1.4bn (£1.2bn) legal charge in the wake of a warning from the EU last month that manufacturers in Germany faced financial penalties for alleged collusion in the area of emissions filtering technology.

The company said it would contest any fine, arguing the talks it engaged in were for the benefit of the environment and society as a whole as they move to bring down emissions further in the wake of the dieselgate scandal at rival VW.

“The participating engineers from the manufacturers development departments were concerned with improving exhaust gas treatment technologies.

“Unlike cartel agreements, the whole industry was aware of these discussions,” BMW said.

Global car sales were up fractionally on the same period last year but at a weaker margin.

Shares were 1% down in early trading.

BMW said it would move to counter rising costs by cutting its engine and gearbox combinations by 50% and seeking €12bn (£10bn) in efficiency savings by the end of 2022.

The results highlight the pressure being felt by manufacturers as they are forced to move away from petrol and diesel technology towards electric drive trains.

BMW has previously warned it may shift Mini production from Oxford if the UK was to leave the European Union without a deal.

It has also said engine production at its Hams Hall plant in Birmingham could be moved to Austria.

The company updated on its performance as the Society of Motor Manufacturers and Traders (SMMT) released the latest sales figures for the UK market.

They showed just over 78,000 new BMW or Mini-branded vehicles had left showrooms in the year to date.

That represented a slight increase on the same period last year.

The SMMT also revealed just over 10,000 alternatively fuelled vehicles – electric or hybrid – left showrooms in April.

That was a 12% rise on the same month a year ago but the body reiterated its call for more central support to help the transition to cleaner vehicles.

The body's chief executive, Mike Hawes, said: “While it's great to see buyers respond to the growing range of pure electric cars on offer, they still only represent a tiny fraction of the market and are just one of a number of technologies that will help us on the road to zero.

“Industry is working hard to deliver on this shared ambition, providing ever cleaner cars to suit every need.

“We need policies that help get the latest, cleanest vehicles on the road more quickly and support market transition for all drivers.

“This includes investment in infrastructure and long term incentives to make new technologies as affordable as possible.”