Higher launch costs dent quarter profits at BMW

Upmarket carmaker BMW saw its net profit reverse 1 per cent in the second quarter amid higher launch costs for new vehicles and a tougher market in China, a major driver of earnings.

BMW said changes in the product mix, with more compact cars, adversely affected sales and profits. Picture: Contributed

The German group, which also owns British brands Mini and Rolls-Royce, said yesterday that net profit slipped to €1.75 billion (£1.23bn) from €1.77bn in the same quarter of last year.

It said it sold a less profitable product mix containing more compact cars, which typically earn less per vehicle.

The profit margin before interest and taxes, a key earnings figure, fell to 8.4 per cent in the period from a strong 11.7 per cent in the year-ago quarter.

Analysts said key BMW models such as the 5 Series and 7 Series are nearing the end of their life cycle, which can hurt sales as customers see newer products from competitors. The company has already unveiled a new 7 Series, which will go on sale this autumn.

Renewing models is costly but pays off if the new version sells better than its competitors. BMW faces tough competition for luxury car sales from Mercedes-Benz and Audi.