BWM Expects Flat Pretax Profits This Year Due to Increased Investment Costs image

BMW said it expects earnings this year to stagnate as profits are eaten up by spending on capacity expansion, fuel-efficient technology and 11 new model launches.

“Due to high levels of expenditure for new technologies and models as well as investment in the production network we expect to report group profit before tax on a similar scale to 2012,” Chief Executive Norbert Reithofer told reporters during its annual earnings conference.

Last year the German automaker reported earnings before tax of 7.82 billion euro, but this year, due to increased investment costs, free cash flow is expected to drop below 3 billion euro from 3.81 billion last year, while the EBIT margin will also drop to 8%-10% from 10.9%. BMW predicts volume growth will increase with a single-digit percentage rate from almost 1.85 million units sold in 2012, due to the newly introduced models such as the BWM 4 Series Coupe.

As the European auto market heads towards its 6th consecutive year of declines, automakers put their hopes in the Chinese and the US markets to make up for the loss on the Old Continent. BMW and its JV partner Brilliance will invest 500 million euro in China to increase production to about 300,000 units annually in the medium term and add another 100,000 units if necessary.