Gear Up for 2025: BMW's Profits Slips by 37%
BMW records significant 37% decrease in profits
Post on FB Tweet Chat Email Print Link BMW, the automotive giant, is grappling with a drop in profits. The Munich-based corporation reported a substantial 37% decline in profits for the 2024 fiscal year, with after-tax earnings reaching 7.7 billion euros, as per their announcement. To put it frankly, that's a 37% dip compared to the previous year and the second consecutive significant drop. Alongside a slump in sales in China, BMW also grappled with issues related to brakes provided by Continental, their supplier.
The revenue landscape wasn't any better, plummeting by 8.4% to 142 billion euros. However, the automaker is optimistic about demand in the current year. Despite the supposedly "tricky" situation and the recent trade tariffs enforced by the US, BMW intends to maintain a pre-tax profit in line with 2024's figure. The company has yet to provide a forecast for post-tax profits.
BMW isn't sailing alone in these turbulent waters. Its two major compatriots, Volkswagen and Mercedes-Benz, have reported similar profit declines. For Volkswagen, profits dropped by 31% to 12.4 billion euros, and for Mercedes, they plummeted by 28% to 10.4 billion euros. Both companies attribute the slump to the challenging conditions in China.
Are German automakers in a dire strait? The answer depends on perception – current profits or future prospects.
To gain a clearer financial picture, it's wise to consider broader trends. As industry expert Frank Schwope, who teaches automotive economics at the University of Applied Sciences in Cologne and Hannover, points out, "We're witnessing a normalization post an exceptional era filled with profits never seen before." During the first Corona downturn in 2020, there were minimal discounts, and demand shifted towards premium models due to the chip and vehicle shortage, giving the manufacturers, including VW, Mercedes, and BMW, extraordinarily high margins that aren't typically achievable.
The current profit drop seems substantial compared to the three exceptional years, but before these years, the previous record profit of 8.7 billion euros was recorded in 2017. When adjusted for inflation, the current 7.7 billion euros profit doesn't appear too bad in comparison.
Schwope agrees that the current profits appear less impressive compared to the extraordinary years, but he prefers not to use the term "crisis." "The current numbers are not dire. They merely look dreary in contrast to the exceptional years," he says, emphasizing that BMW is not in crisis.
However, Schwope reminds us, "The times are testing, and manufacturers should fortify their structures against an impending crisis in good time."
This sentiment is echoed across the industry. The难读出车业 (Dudenhoeffer warns of US tariffs "Trump is sucking away jobs in the German car industry") business climate index for the automotive industry, as surveyed by the Munich-based Ifo Institute, currently stands around 35 points in the negative.
To add to the challenging situation, BMW has recently experienced job growth among its permanent staff, but the industry as a whole is seeing significant layoffs. Nearly a quarter of jobs for the core VW automobile brand in Germany are projected to disappear by 2030. Mercedes plans to slash costs by billions of euros in the coming years, while Porsche has 1900 jobs on the chopping block. In addition, Ford in Germany has 2900 positions under threat, and suppliers like Bosch, Schaeffler, ZF, Continental, ThyssenKrupp, among others, are trimming or reducing staff as well.
BMW Paces the E-car Race
The global automotive sector is grappling with disruption due to factors like disrupted supply chains, surging material costs, uncertain international trade relations, and escalating tariffs proposed by US President Donald Trump. Adding to these woes, domestic labor and energy costs are relatively high, China presents a mixed picture, and competition from there in the increasingly crucial field of electromobility is fierce.
In the midst of these challenges, BMW is making strides in the world of electric vehicles (E-cars). Last year, the company increased its E-car sales significantly, positioning itself ahead of its German counterparts. BMW considers these electric vehicles as their key growth drivers, with additional boost set to come from the new class, whose first series vehicle is expected to go into production by the end of 2025. Last year alone, the company invested a massive 18 billion euros in research and development.
Source: ntv.de, as/dpa
- BMW
- Profit Decline
- BMW's community policy acknowledges the current challenges, including the significant 37% drop in profits in 2024, and is focusing on vocational training to strengthen its workforce for the future, particularly in the growing field of electromobility.
- Despite the slump in profits, BMW continues to invest heavily in electromobility, with a new class of electric vehicles expected to go into production by 2025, highlighting the company's commitment to this vocational training area.
- In light of the predicted weakened dividend due to the profit decline in the automotive industry, BMW is emphasizing its long-term strategy in electromobility as a key driver for future growth.
