A severe slump in Chinese sales and the hit to consumer sentiment from the Middle East dealt a blow to BMW's earnings in the second quarter, the company said on Thursday, pledging deeper cuts to steel itself against tough competition.
The premium carmaker reported a 35% drop in quarterly pretax earnings to €1.7 billion ($1.95 billion). The operating margin in the core automotive business narrowed to 2.3%, beating analysts' forecast of 2.2% but down from 5.4% a year earlier.
"The automotive industry is faced with rapidly escalating challenges – intense global competition, increasing regional regulatory requirements and the implications of geopolitical conflicts will shape our business model in the years ahead," CEO Milan Nedeljkovic said.
BMW, however, confirmed its full-year guidance, targeting an operating margin for cars in the range of 1% to 3%, after a shock profit warning in June which triggered negotiations with workers over cuts.
The company now plans to axe 8,000 jobs under an agreed voluntary redundancy programme, a source said on Wednesday.
"Competition in the global automotive market has sharpened noticeably," finance chief Walter Mertl said.
Porsche and its parent Volkswagen are also in the process of overhauling their operations, having announced deep job cuts in recent weeks, with Volkswagen also weighing plant closures.
BMW's sales volume declined by about 5% globally in the second quarter, dragged lower by a 30% fall in China, where industry observers have warned that the brand's new suite of EVs could come too late in a runaway, tech-driven market.
A protracted downturn in the Chinese car market, the world's biggest, has increased pressure on foreign carmakers there while Chinese rivals barred from the U.S. now look to Europe for growth.
($1 = 0.8733 euros)
(Reporting by Rachel MoreEditing by Ludwig Burger and Tomasz Janowski)
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