Falling margins and challenges in the Chinese market
BMW, one of the world’s leading automotive manufacturers, recently reported a significant decline in its auto production margin, which fell to 2.3% in the third quarter. This represents the lowest value recorded in the last four years and well below the company’s goal of reaching at least 6% by 2024. The situation is further complicated by a costly recall involving up to 1.5 million vehicles due to a defect in the braking system provided by Continental AG
.
Impact of recall and weak demand
The recall forced BMW to set aside almost 1 billion euros to repair defects, temporarily halting deliveries of hundreds of thousands of high-end vehicles. This problem is part of a context of faltering demand, particularly in China and Europe, where sales have been affected by a reduction in consumer spending on luxury goods. In the third quarter, sales in China fell by 30%, an alarming figure for BMW’s largest market, where local manufacturers offer
cheaper alternatives.
Sales performance and future prospects
Despite the difficulties, BMW recorded an increase in electric vehicle sales, with an increase of 10% compared to the previous year for models such as the i4 sedan and the iX1 SUV. However, the general decline in sales led to a negative cash flow of 2.48 billion euros in the third quarter. Chief Financial Officer Walter Mertl said that demand in China will remain weak even in the next quarter, highlighting the challenges facing the company. Despite this, BMW plans to reduce inventory levels and aims to achieve an annual cash flow of more than 4 billion euros
.
In summary, BMW is facing a period of great uncertainty, with declining margins and sales that do not meet expectations. The company’s ability to adapt to these challenges and to respond to market needs will be crucial to its future success.