Published on August 7th, 2020 | by Subhash Nair0
BMW Posts First Quarterly Loss in Over a Decade
For the first time in more than ten years, BMW Group posted a loss for the 2nd quarter of 2020. BMW made an operating loss of 666 million euros and were the last of the German brands to report how they did for Q2 2020. The last time BMW Group had a bad quarter, it was because of The Great Recession in the late 2000s.
Despite the bad quarter, overall, BMW Group are still not in the red for 1H 2020 thanks to their performance in the Q1 2020. They also saw some growth
The coronavirus pandemic and its effect on the economy is the primary reason for the loss, but there are other factors as well. BMW have also been a little behind the curve with regards to building a fully-electric vehicle. They only just launched the all-electric MINI SE (which might come to Malaysia by the end of this month) and even more recently put out the BMW iX3, a fully-electric version of the current generation X3.
In fact, BMW is hoping that more fully-electric options will allow them to post small profits overall by the end of 2020. Fully-electric variants of the facelifted X1, 5 and 7 Series are reportedly on the way. They’re also close to bringing more focused all-electric models like the i3, i4 and iNEXT within a year or two.
The global spread of coronavirus had a severe impact on deliveries of BMW Group vehicles to customers, both in the second quarter of 2020 and on a six-month basis. In total, 485,464 1 units were sold during the period from April to June 2020, significantly lower than one year earlier (2019: 649,856 units 1, 2 ; – 25.3 %). During the first six months of 2020, 962,575 3 BMW, MINI and Rolls-Royce brand cars were delivered to customers (2019: 1,250,470 2,3 units; –23.0%). Sales of electrified vehicles of the BMW Group showed a positive development against the overall trend, with an increase of 3.4 % in the first half-year. Plug-in hybrid variants are now available across the BMW brand’s model portfolio.
A total of 354,765 new lease and credit financing contracts were concluded with retail customers during the period from April to June 2020 (2019: 501,663 contracts; – 29.3 %). The figure for the six- month period fell to 804,452 contracts (2019: 971,287 contracts: – 17.2 %). As at 30 June 2020, the portfolio of credit financing and leasing contracts with retail customers totalled 5,502,786 contracts and was there- fore similar to the level recorded at the end of the previous financial year (31 December 2019: 5,486,319 contracts; + 0.3 %).
Corona pandemic takes its toll on Group earnings
In the first six months of the year, the BMW Group’s net assets, financial position and results of opera- tions were negatively impacted by the spread of the corona pandemic and the accompanying regulations introduced to contain it. While the slump in the Chinese market and the closure of dealerships in other markets from mid-March onwards had a sig- nificantly dampening effect on first-quarter results, the escalation of COVID-19 to pandemic proportions and the related containment measures had an impact on all the BMW Group’s other key sales markets in the second quarter. Exacerbated by lockdowns, deal- ership closures and the accompanying production interruptions, the drop-off in customer demand took its toll on Group earnings. Nevertheless, the Chinese market staged a slight recovery in the second quarter, sending a positive signal.
Group revenues totalled € 43,225 million for the first half of the year (2019: € 48,177 million; – 10.3 %), and € 19,973 million for the second quarter (April – June 2019: € 25,715 million; – 22.3 %). The Automotive segment’s revenue performance during the first two quarters of the year reflected the lower num- ber of vehicles sold as well as a drop in spare-parts revenues caused by the closure of dealerships and stay-at-home restrictions imposed to combat the corona pandemic. Favourable product mix effects due to the less pronounced decrease in the sale of high-revenue models and better selling prices on the back of the rejuvenated product portfolio par- tially offset the effect of lower volumes. Increased revenues generated with the Chinese joint venture BMW Brilliance Automotive Ltd., Shenyang, also had a positive impact in the second quarter.
Over the six-month period, a portfolio-related in- crease in leasing revenues was more than cancelled out by the lower level of revenues generated from the sale of returned lease vehicles.
The lower volume of new leasing business in the first half-year, as well as lower expected new leasing business, resulted in a year-on-year decrease in the amount of revenues eliminated on consolidation 4.
Compared to the corresponding periods in the previous year, Group cost of sales decreased by € 1,176 million (– 3.0 %) in the first half of the year and by € 2,488 million (– 11.8 %) in the second quar- ter. Reduced manufacturing costs due to lower sales volumes – particularly in the second quarter – were partially offset by increased expenses recognised for risk provisioning, including the reassessment of residual value and credit risks. Furthermore, the elimination of revenues described above had an equal and opposite effect on cost of sales, whereby the lower volume and lower expected volume of new leasing business resulted in a year-on-year decrease in the amount of cost of sales eliminated on consolidation.