BMW, the renowned German luxury automaker, has recently disclosed a notable 36.9% decline in its group net profit for 2024, dropping to 7.68 billion euros from a previous 12.17 billion euros. This decrease in profitability highlights severe challenges facing the automaker, including escalating tariffs and diminishing demand in its crucial Chinese market.
The company's profit before tax also fell sharply to 10.97 billion euros compared to 17.10 billion euros last year, reflecting ongoing pressures within the automotive sector. The latest financial results have been attributed to a combination of factors, particularly lower sales volumes and a downturn in selling prices within the automotive segment.
Analysts' expectations had been slightly higher, with forecasts estimating net income at 7.70 billion euros and revenues at 147.96 billion euros, according to FactSet. Oliver Zipse, the management board Chairman, emphasized the ambitious financial plans initially laid out for 2024, remarking on how the year unfolded differently due to various adversities.
"As you would expect from your Company, we had ambitious plans for financial year 2024. However, over the course of the year, things turned out differently. This includes the financial impact of delivery stops and recalls for the supplied Integrated Brake System (IBS) component, general market weakness in China and subdued demand for electric vehicles in several markets, with corresponding effects on pricing," he stated.
Zipse expressed determination to return to a growth trajectory in the Chinese market, aligning with their strategic plans. In light of these results, BMW's board will put forward a proposal for a dividend of 4.30 euros per common share and 4.32 euros per preferred share for 2024, down from 6 euros and 6.02 euros per share respectively the previous year. Looking ahead to 2025, BMW anticipates an uptick in demand, fueled by a stabilization of inflation and expected moderate cuts to key interest rates in several countries.
The company forecasts a slight increase in overall sales, driven primarily by the introduction of new model launches. Group earnings before taxes are projected to stabilize at levels similar to the previous year. However, BMW has laid out that challenges are expected to persist, citing ongoing issues in the Chinese market, tariff hikes, and challenges within the supply chain.
The company's plan to further its electrification and digitization strategy in 2025 remains intact, though anticipated reductions in costs and investment following peaks in 2024 could shape a different financial landscape. All tariff increases that came into effect as of Wednesday have also been factored into the company’s 2025 outlook. As of midday trading, BMW shares were down nearly 1%, reflecting the market's cautious sentiment regarding the company's future performance..