BMW profits held back by investment in new models

Tue Nov 5, 2013 9:23am EST
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By Andreas Cremer

BERLIN (Reuters) - BMW (BMWG.DE: Quote), the world's biggest luxury carmaker, said investment in technology and new models such as the i3 electric car would hold back fourth-quarter earnings, after it reported a bigger than expected drop in third-quarter profit.

The German group, which is spending heavily in a bid to stay ahead of rivals Mercedes and Audi, also said on Tuesday quarterly profits were weighed down by discounts to lure cash-strapped European buyers and warned demand for cars in the region might not rebound until the second half of next year.

European car sales slumped to their lowest six-months total in 20 years in the first half of 2013 amid record unemployment and government austerity measures, though there have been signs recently that demand is at least stabilizing.

Premium carmakers have fared better than mid-market rivals, particularly thanks to strong demand from China, and BMW defended its investment in launching 25 new models this year and next, including the all-electric i3 city-car that will hit showrooms this month.

"It's our goal to ensure the competitiveness of the group over the long term," said finance chief Friedrich Eichiner. "That's more relevant than short-term profit."

However, BMW shares fell as much as 4.8 percent, their biggest decline in four months.

BMW said earnings at its main autos division might take an extra 500-million-euro ($676 million) hit in the fourth quarter due to the cost of upgrading technology and expanding production.

The additional outlay could push the division's quarterly margin on earnings before interest and tax (EBIT) to the lower end of BMW's target range of between 8 and 10 percent, Eichiner said during a conference call.   Continued...

The logo of German car manufacturer BMW is seen on the bonnet of a vehicle covered with water drops in Kiev March 27, 2012. REUTERS/Str