Brilliance China’s profit warning impacts BMW shares image

Brilliance China Automotive Holdings Ltd, the Chinese partner of BMW AG, delivered a profit warning on Monday, which immediately impacted the shares of the world’s largest premium automaker, BMW AG.

The joint venture partner of the German automaker said there is concern from the slowdown in deliveries across the largest car market in the world, with Brilliance, manufacturer of minivans for China’s domestic market and assembly contractor for BMW via their joint venture announced first-half profit could plummet as much as 40 percent from the same period last year as the BMW Brilliance 50 percent owned joint venture was in trouble. “The decrease in BMW Brilliance’s profit was caused by the higher selling costs incurred during the first six months of 2015 as a result of the slowdown in the growth of the Chinese economy and the automotive industry,” commented the company in a statement to the Hong Kong Stock Exchange. The same day, the shares of the German automaker lost ground, as traders were influenced by the profit warning of the Chinese partner. The pessimist outlook even impacted the shares of other major German carmakers, such as Daimler Ag – the parent of Mercedes-Benz – and Volkswagen AG, the parent of the namesake brand and of luxury unit Audi.

According to the filling, Brilliance’s profit is highly dependent on the joint venture’s margins, with the company also citing increased costs from the upcoming introductions of new model and new production locations. Global automakers, including BMW, GM and Ford, resorted to deep price cuts on the Chinese market during the recent months as China’s auto market is being pulled down by the economy’s slowest progress in 25 years.

Via Reuters