BMW's earnings in Germany dip by over 25%
BMW, the German automaker, announced its financial report on Thursday (31.7.), revealing a decline in profits for the third consecutive year. The company's after-tax earnings for the first half of the year amounted to 4 billion euros, marking a decrease of more than 29% compared to the same period last year.
The profit decline appears to be a result of external factors such as tariffs and economic conditions in China. The company's largest single market, China, experienced a 15.5% drop in vehicle sales in the first half, impacting the entire Asia-Pacific region negatively. Europe and North America, however, saw some sales growth.
Additional costs arising from tariffs, such as those imposed by the U.S. under President Donald Trump's trade policies, put pressure on profitability. Tariff-related costs are estimated to reduce automotive margins by about 1.25 percentage points in 2025, with a greater impact felt during the first half of the year.
The weak dollar may have also contributed to BMW's profit decline.
The company's profit drop was not unique among German automakers. VW and its subsidiary Audi saw more than a third of their profit decline in the first half of the year, while Mercedes-Benz lost more than half of its profit in the same period.
Despite these challenges, BMW's overall sales volume remained relatively steady year-over-year, falling only 0.5%. The company's profit decline seems to be primarily due to factors beyond unit sales, such as regional disparities and increased costs.
In summary, BMW’s profit decline in the first half of 2021 resulted mainly from weaker Chinese sales, increased tariff costs, and lower lease resale earnings—all amid a competitive and economically challenging environment. The company, like others in the industry, continues to navigate a complex landscape of trade tensions, economic conditions, and consumer preferences.
In an attempt to recover losses, BMW might consider applying cost-cutting measures in the automotive industry, focusing particularly on the contribution of tariffs and economic conditions in China to their profit decline. The company could also explore diversifying its markets to reduce reliance on a single market like China, which experienced a significant drop in vehicle sales.
