BMW revs research spending higher, profits fishtail

German car giant BMW said Tuesday it had stepped up spending on research and new models, which weighed down its third quarter profit, although the luxury automaker still hiked its performance targets for the full year.

Between July and September, net profit at the group shrank 1.8 percent year-on-year to 1.8 billion euros ($2.1 billion), well short of the 1.95 billion euros predicted by analysts.

The slightly disappointing results come as the Munich-based group throws cash at a scramble for advantage in the high-tech fields known in the industry as ACES -- Autonomous, Connected, Electrified and Shared vehicles.

BMW highlighted 400-million-euro spending on expanding its Munich research centre to 5,000 employees.

It is also investing in its factory in Dingolfing, southeastern Germany, where it will manufacture many of the specialist components needed for some 25 new electric models set for launch by 2025.

- Tech bets -

Meanwhile, the third quarter also saw the first BMW employees move to a new "autonomous driving campus" closer to its home base.

The new site will bring together BMW researchers with colleagues from US chipmaker Intel, Israeli technology firm Mobileye, carmaking competitor Fiat Chrysler and automotive suppliers Delphi, Continental and Magna.

BMW is "investing substantially in tomorrow's mobility," chief executive Harald Kruger said, praising in particular the "unique cooperation arrangements" it had struck in the field of self-driving research.

There are high stakes for BMW's big bets on future technologies, as executives said it had increased research and development spending 22 percent to 4.06 billion euros in the first nine months year-on-year.

Most of Germany's world-renowned carmakers are pushing to make up for a technology deficit compared with foreign competitors like California's Tesla, after decades spent comfortably at the top of the global car industry.

Volkswagen's dieselgate scandal and cartel allegations against big names like Mercedes-Benz maker Daimler, BMW, and VW with its subsidiaries Audi and Porsche have painted a picture of firms happy to sit on their laurels rather than make big innovations.

But BMW stands slightly apart for its early interest in electric vehicles, set to pay off this year as it forecasts sales of more than 100,000 hybrid or full-electric models.

In the third quarter, the group increased unit sales of BMW, Mini and Rolls-Royce cars by 1.2 percent, to 590,415, while revenues added 0.3 percent to reach 23.4 billion.

But operating, or underlying profit fell 3.2 percent, to 2.3 billion euros.

And its closely watched operating profit margin edged down to 8.3 percent of revenue from cars in the third quarter, from 8.5 percent a year earlier.

BMW said it will continue to spend heavily on research and new models in the fourth quarter, while it warned that a "politically volatile environment" worldwide could affect sales.

- Recall woes -

There was little sign of that between July and September, with sales driven by the success of the new BMW 5 series as well as brisk demand for the group's popular X1 compact SUV, the group said.

Looking ahead to the full year, BMW upped its forecast to a "solid" increase in underlying profit from 2016's figure, where previously it had called for a "slight" boost.

It added that it expected its profit margin for the full year to remain within the 8 to 10 percent target range.

The confident outlook comes just days after the German titan was buffeted by a mass recall of some one million cars in North America due to potential fire risks.

BMW has warned the recall could possibly spread to other countries as well.

The company is also the target of an EU antitrust probe into alleged collusion between German carmakers, and saw its Munich headquarters raided by investigators last month.

BMW shares shed 2.75 percent to trade at 87.50 euros around 1300 GMT, underperforming the DAX index of blue-chip shares which was down 0.09 percent.

Source: AFP