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BMW losses almost US$800m as sales slide during lockdowns

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BMW expects to make an operating profit this year despite losing 666 million euros (S$1.08 billion) in the second quarter after sales of its luxury cars slumped during coronavirus lockdowns, the company said on Wednesday.

[FRANKFURT] BMW expects to make an operating profit this year despite losing 666 million euros (S$1.08 billion) in the second quarter after sales of its luxury cars slumped during coronavirus lockdowns, the company said on Wednesday.

The German manufacturer of BMWs, Minis and Rolls-Royces, said deliveries had begun to recover, including in China, but the rebound would not be enough to make up for the shortfall in sales lost to the pandemic.

Shares in BMW fell 3 per cent following the results with some analysts saying they had not expected such a big loss in earnings before interest and taxes (Ebit).

BMW also said its outlook did not factor in the potential impact of a second wave of Covid-19 infections, nor the prospect of a more sustained or deeper recession in its key markets.

The pandemic has hit Fiat Chrysler, Ford and Daimler particularly hard at time when the traditional auto industry is ramping up spending on low-emission technologies ahead of stringent European anti-pollution rules.

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BMW's Ebit margin for cars slumped to -10.4 per cent from 6.5 per cent in the second quarter last year, when it's operating profit came in at 2.2 billion euros. It delivered 485,464 cars in the second quarter, down 25 per cent from a year earlier.

By contrast, electric car pioneer Tesla saw its automotive gross margin widen to 25.4 per cent in the second quarter, up from 18.9 per cent a year earlier, despite a 5 per cent drop in deliveries.

Jefferies analyst Philippe Houchois said BMW's margin forecast for the year as a whole suggested a healthy recovery in the second half of 2020, even though the second-quarter results were below the consensus.

In May, BMW warned it would post a second-quarter loss and slashed its outlook, forecasting an automotive Ebit margin of 0-3 per cent for 2020 compared with the 2-4 per cent range it expected before the pandemic struck.

"We are now looking ahead to the second six-month period with cautious optimism and continue to target an Ebit margin between 0 per cent and 3 per cent for the automotive segment in 2020," BMW chief executive Oliver Zipse said in a statement.

BMW reiterated that it expected pretax profit to be significantly below 2019 levels and for car deliveries to customers to fall significantly this year.

REUTERS

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