BMW warns of €1B loss due to escalating trade tariffs
What's the story
Renowned automaker BMW has projected a whopping €1 billion hit to earnings for the year 2024. The company's CEO Oliver Zipse blamed the forecast on rising trade tariffs, including EU duties on its China-manufactured electric vehicles (EVs) and newly imposed US tariffs. These developments are affecting global trade. The loss is expected to impact BMW's earnings margin for cars in 2025, projected at 5-7%.
Tariff impact
CEO describes €1 billion provision as 'conservative'
Zipse called the €1 billion provision in the company's earnings "conservative," hinting that further EU and US tariffs could possibly raise that number. However, despite the challenges, Zipse remained hopeful that not all current tariffs would stay for the whole year. BMW's CFO Walter Mertl also reiterated the same, saying, "If the situation changes, so does our outlook."
Market response
BMW's stock dips as tariff impact weighs on earnings
Reacting to the disappointing margin forecast, BMW's shares dropped 2.3% earlier today. The company is also at the center of an intensifying trade war between the US and EU, with President Donald Trump threatening higher tariffs on European car imports from April 2. The situation has also contributed to BMW's net profit plummeting by over one-third.
Financial performance
Net profit and proposed payout ratio
BMW's net profit for 2024 declined to €7.68 billion amid weak sales in China and Germany, and delivery delays due to brake issues. The company's fourth-quarter profit fell 41%, in line with earlier warnings of higher fixed costs from unwinding inventory affecting earnings in 2024's last quarter. In response, BMW proposed an increased payout ratio of 36.7%, including a €4.32 per preferred share dividend for 2024, despite a decline from the previous year's payout.