Pandemic Induced Lockdown Sale Slide Caused $800M Loss For BMW In Second Quarter

The German auto giant BMW id forecasting an operating profit this year even though the company reported a loss of 666 million euros ($787 million) during the second quarter following slump in sale of its luxury cars during the lockdowns implemented across most major markets to prevent the spread of the novel coronavirus pandemic, the company has said.

Deliveries of its cars in many markets, including in China, had started to witness recovery, said the German manufacturer of BMWs, Minis and Rolls-Royces, but added that the revamp would not be enough to offset the decline in the sale encountered by the company because of the pandemic.

There was a 3 per cent drop in shares of BMW after the company announced the results as some analysts said that they were not expecting to see such as huge loss in the company’s earnings before interest and taxes (EBIT).

The forecast by the company did not however include the possible impact on business because of the second wave of Covid-19 across the world as well as the impact of a continued and deeper impact of the pandemic on the economy of its key markets, BMW also said.

Fiat Chrysler, Ford and Daimler have been particularly hard hit by the pandemic even as the conventional auto industry was getting ready to make significant investments in development of technology and capacity for manufacturing of low-emission vehicles just ahead of the setting in of the stringent European anti-pollution rules.

The EBIT margin for cars of BMW in the second quarter dropped to minus 10.4 per cent compared to a positive 6.5 per cent achieved by the company in the same quarter last year when the company had reported operating profits of 2.2 billion euros. During the second quarter, the company delivered 485,464 cars, 25 per cent lower than what the company had achieved in the same quarter a year ago.

In comparison, automotive gross margin for the United States based electric car pioneer Tesla for the second quarter was at 25.4 per cent compared to 18.9 per cent for the same quarter a year earlier even though the company reported a 5 per cent slump in its deliveries.

A healthy recovery in the second half of 2020 was suggested BMW by the company’s margin forecast for the year as a whole despite the company missing analysts’ expectations for the second quarter, said Jefferies analyst Philippe Houchois.

Warning of a second quarter loss and a slashing of its outlook was mad by BMW in May this year. Mack then, the company had forecast an automotive EBIT margin of 0 per cent to 3 per cent for the entire 2020 compared with the 2 per cent to 4 per cent range as was expected by the company prior to the pandemic outbreak.

“We are now looking ahead to the second six-month period with cautious optimism and continue to target an EBIT margin between 0% and 3% for the automotive segment in 2020,” BMW Chief Executive Oliver Zipse said in a statement.

(Adapted from MoneyControl.com)

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