BMW Hit by Fierce Competition -- Update

By Friedrich Geiger 

BERLIN--German premium car maker BMW AG on Tuesday reported a decline in second-quarter profit because of rising costs, despite a rise in revenue and car sales.

Second-quarter net profit fell 1.1% to EUR1.74 billion ($1.91 billion), beating analysts' forecasts of EUR1.60 billion. Personnel costs and expenditures on new product startups were higher in the quarter and a larger share of compact cars also weighed on earnings, said the company.

The fall in profit came despite a 20% rise in revenue to EUR23.94 billion after the number of BMW, Mini and Rolls-Royce cars delivered to customers rose 7.5% to 573,079.

BMW's closely watched earnings before interest and tax margin of the automotive business deteriorated significantly to 8.4% from 11.7%.

The Chinese market is "becoming increasingly competitive," said BMW, adding to investor worries after Chinese partner Brilliance Automotive Holdings Ltd. warned that higher selling costs of the joint venture with BMW weighed on earnings, and rival Volkswagen AG received a lower operating profit contribution from China in the second quarter.

For the full year, BMW continues to expect a solid rise in pretax group profit and significant revenue growth at its automotive segment.

Write to Friedrich Geiger at [e-mail]

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