BMW Continues Drive to Win Premium Car Market Race -- Update

By William Boston Features Dow Jones Newswires

German luxury car maker BMW AG raised its full-year earnings outlook Tuesday, despite stagnant revenue and a drop in earnings, as it invests in electric vehicles and self-driving car technology.

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BMW is competing in a tight race for global leadership of the premium car market with rivals Mercedes-Benz, owned by Daimler AG, and Volkswagen AG's luxury unit Audi. The auto maker said sales growth in its premium sedans and sport-utility vehicles slowed in the three months to the end of September and investment in electric vehicles and new technology, such as self-driving features and connecting cars to the internet, weighed on profits.

BMW said net income fell 2.8% to EUR1.76 billion ($2.04 billion) in the third quarter, as revenue edged 0.3% higher to EUR23.4 billion. Overall sales of its BMW-branded vehicles rose 1.2% higher to 590,415 vehicles in the quarter, but revenue in the automobile division fell 2.4% to EUR21 billion and pretax profit in the division fell 4.6% to EUR1.75 billion.

The weak performance in the third quarter added to the negative sentiment among investors that has dogged BMW shares this year. BMW shares were down 2.5% at EUR87.73 in morning trade in Frankfurt, underperforming the broader automotive index.

Looking to the full year, BMW increased its outlook to "solid" earnings growth for the entire group, from a previous forecast of "slight" growth. But it downgraded its outlook for its core automotive business to slight growth, keeping its overall profit margin target in a range of 8% to 10%.

In a push to gain traction, the Munich-based firm is rolling out new models, such as the 8-series coupe and X7 SUV, and is preparing to launch 25 new battery electric and hybrid vehicles by 2025.

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Daimler previously reported a 16% drop in third-quarter net profit to EUR2.2 billion, despite a 6% increase in revenue to EUR40.8 billion. Audi reported after-tax profit of EUR969 million, double the previous year, and a 0.7% increase in quarterly revenue to EUR14 billion.

BMW reported a 9.1% pretax profit margin in the automotive division after the first nine months of the year, compared with 9.7% at Daimler and 9.2% at Audi.

Germany's three big premium car makers are all investing heavily in technology to fend off a challenge from upstarts such as Waymo LLC, the self-driving car unit owned by Google parent Alphabet Inc.

The auto makers are also rushing to develop electric cars as the decline of diesel gains pace in the wake of an industrywide crisis sparked by Volkswagen AG's 2015 emissions-cheating scandal. They also face new competition in electric vehicles from Tesla Inc., a handful of Chinese startups, and the push by rivals such as Volvo and Jaguar Land Rover to develop luxury electric cars.

But while some investors shrugged off BMW's underperformance, which was below analysts' consensus forecasts in the quarter, others were disappointed in BMW's performance.

"It will not help the stock turn the corner after already being the worst-performing Western (manufacturer) this year," Arndt Ellinghorst, analyst at Evercore ISI, a brokerage, wrote in a note to shareholders.

Max Bernhard contributed to this article.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

November 07, 2017 05:49 ET (10:49 GMT)