BMW’s automotive division posted a 6-percent drop in earnings before interest and taxes (EBIT) in the third quarter of 2013 to EUR1.55 billion ($2.09 billion), cutting its operating profit margin by half a percentage point to 9 percent in the period. Rivals Audi and Mercedes-Benz posted EBIT margins of 9.4 percent and 7.3 percent in the third quarter respectively.
BMW’s automotive division also logged less than a percent drop in revenues to EUR18.8 billion, despite posting an 11-percent hike in deliveries in the quarter. BMW chief executive Norbert Reithofer remarked that the carmaker’s earnings dropped in the third quarter due to higher level of expenditure on new technologies as well as a challenging market environment in Europe, which has forced the company to offer discounts.
BMW is revamping its product lineup by introducing 25 models in 2013 and 2014, with 10 of them all-new like the Rolls-Royce Wraith. Mercedes is planning to launch 13 all-new models by 2020, while Audi is expanding its SUV lineup. BMW's product expansion is part of its bid to retain its competitive edge over Audi and Mercedes, which are both aiming to topple BMW as the largest luxury global carmaker in terms of sales by the end of the decade.
Undermining BMW’s results are the high cost of launching the i3 compact that will arrive in Europe this month and the United States in 2014, as well as other technologies. Arndt Ellinghorst, head of automotive research at ISI, said in a note to clients that once BMW's i start-up costs begin to wane, its focus will return to growth.
BMW reiterated its forecast of a full-year automotive EBIT margin between 8 percent and 10 percent. It also reiterated a group pretax profit that is similar to EUR7.82 billion posted in 2012. It however, cautioned that conditions in auto markets may remain "volatile and challenging" in coming months.