BMW Faces Headwinds in Wake of Coronavirus

By William Boston

BERLIN--Charges linked to an antitrust probe sent profits down 29% at Bayerische Motoren Werke AG, but the luxury car maker could face even greater headwinds this year as already weak global demand crashes in the wake of the coronavirus pandemic.

The Munich-based maker of the BMW, Mini and Rolls-Royce brands is making big upfront investments to build electric cars to fulfill tighter emissions regulations. However, those investments are becoming more difficult to finance, as the global economy teeters on the edge of recession and the coronavirus continues to spread.

BMW said Thursday that sales last year had risen nearly 8% to 104 billion euros ($117.6 billion) and net profit had fallen to EUR5 billion from EUR7 billion a year before.

BMW is in the crosshairs of a European antitrust investigation, which forced the company to take a EUR1.4 billion charge against earnings earlier in the year in lieu of potential fines and legal fees. BMW said it would contest the European Union's allegations with all legal means at its disposal.

Aftertax profit in the three months to the end of December was EUR1.4 billion, up from EUR1.32 billion. But the higher earnings and revenue at the end of the year did not offset losses in previous quarters.

Now, investors are wondering whether that late momentum can be maintained in the face of the upheaval caused by the coronavirus.

The carmaker said nothing about the impact of the sharp decline in auto markets worldwide since the beginning of the year as the coronavirus spread from China to Europe and the U.S.

The company is expected to provide some outlook for the new year at a news conference on March 18. But the conditions under which last year's business operated bears little resemblance to the situation global auto makers face in the wake of the coronavirus, which has sent global stock markets reeling.

"BMW's outlook next week is likely to be very cautious because no one can venture a guess as to the expansion or extent of the crisis," said Frank Schwope, an auto analyst at Nord/LB.

Investors watching the global economy meltdown over the past weeks are eager to get some guidance from auto makers, but most manufacturers are still hoping to recoup a large chunk of the sales lost later this year.

Volkswagen said Thursday that business was resuming in China after weeks of plant shutdowns and that it hopes factories will be back to normal operations by the middle of the year.

For now, however, auto makers are taking a huge hit in China.

New car sales in the country, which accounted for 27% of the 2.5 million cars BMW sold last year, plunged 79% in February.

Germany, France, Italy, Spain and the UK, the five markets accounting for around 80% of total sales in Europe, all posted sharp declines in new car sales in February and a steep fall in auto production. In Germany alone, the biggest auto market in Europe by sales, auto production is down 10% so far this year and new car sales are down 9%, according to the German Association of the Automotive Industry.

The U.S. market remains the only leg still standing. Last month preliminary data showed U.S. light vehicle sales rose nearly 6% to 1.3 million vehicles, though analysts predict the U.S. market could decline 1.5% to around 13.5 million vehicles this year.

Write to William Boston at [e-mail]

(END) Dow Jones Newswires

March 12, 2020 13:56 ET (17:56 GMT)

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