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BMW caves in to trade, pricing pressures with profit cut

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BMW cut its profit forecast, becoming the latest carmaker to succumb to pressures ranging from trade wars to scrutiny on emissions.

[MUNICH] BMW cut its profit forecast, becoming the latest carmaker to succumb to pressures ranging from trade wars to scrutiny on emissions. The shares fell the most in over two years.

International trade conflicts are distorting demand more than it expected when it first warned on its profit goals in early August, BMW said Tuesday in a statement.

The German carmaker is also being hurt by new European Union emissions tests, even though it got ready sooner than rivals Volkswagen AG and Daimler AG. Other companies dumped cars onto the market before the Sept 1 changeover to tougher rules, leading to to widespread discounting.

"The continuing international trade conflicts are aggravating the market situation and feeding uncertainty," BMW said in a statement. "These circumstances are distorting demand more than anticipated and leading to pricing pressure in several automotive markets."

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A number of carmakers have warned of lower profits in recent months blaming Client growing US-China trade tensions. The conflict is adding to unprecedented pressure on an industry grappling with the shift to electric cars. BMW is among the most-affected, as it ships popular sport utility models like the X5 from its US plant in Spartanburg to China.

BMW also said it won't meet its profit margin goal on return on sales from automaking, crashing out of a targeted range of 8 per cent to 10 per cent for the first time since 2010. The carmaker now forecasts a 7 per cent margin.

"Too many things came together this year, but we can assume this profit warning will be a one-time thing," Sven Diermeier, a Frankfurt-based analyst at Independent Research GmbH said. "The third quarter must have been especially bad."

As BMW grapples with the fallout from intensifying trade tensions, the Trump administration ratcheted up the pressure further, announcing Monday tariffs on US$200 billion in Chinese goods. China responded with duties of its own on US$60 billion in US products. The Chinese government also called off planned talks with US officials.

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