BMW is expected to report (on August 4) reduced profit and sales for the second quarter as it grapples with much lower sales in the US market and continued tough times in Europe where its product range leaves it poorly placed to benefit from scrappage incentives.
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An indication of the cold winds blowing through its Bavarian HQ was provided yesterday when the firm said it will pull out of Formula One motor racing.
In the US, BMW Group vehicle sales in the first half were 114,628 units, 27.5% below last year’s pace.
Sales figures published by ACEA show that BMW Group car sales in Europe in the first half of the year were 355,758 units, 22.3% down on last year. Even its Mini premium small car brand was off 21% at 65,962 units.
Analysts say the company seems to have the wrong low-end product to benefit from scrappage incentives in Europe’s recession battered car market.
“BMW, as a premium manufacturer has barely benefited from the numerous European government incentives,” says Sabine Blümel, an analyst with Creative Global Investments (LLC).
After first quarter results which pleasantly surprised analysts, it looks as if the Q2 numbers will show a company fully hit by recession.
Blümel expects the firm’s automotive division to report a second quarter 20% year-on-year decline in revenue, a 19% year-on-year cut in production and losses at EBIT and pre-tax level of EUR50m and EUR140m respectively.
However, she also says that the firm managed to cut inventories and expects BMW Group to remain in profit for the full-year on sales 14.8% down on last year. She also highlights successful efforts to generate cash.
A flip-side to BMW’s apparent lack of traction in European scrappage schemes this year is that it should remain relatively unaffected by the post-incentive hangover expected in 2010.
A new 5-Series will also help next year.
Developments in the US vehicle market are key. “BMW will be able to benefit from any recovery in demand globally and the US specifically,” says Blümel.
