BMW has acknowledged that financial pressures stemming from tariffs on its China-made electric vehicles (EVs) and U.S. duties on steel, aluminum, and vehicle imports from Mexico are expected to impact its earnings margin for the automotive segment.
The company forecasts a margin of 5-7% for the year. Despite these challenges, BMW executives remain cautiously optimistic.
Chief Financial Officer Walter Mertl stated that the company’s outlook would be reassessed if the tariff landscape changes.
Impact of Escalating Trade Conflicts
BMW’s strong reliance on exports from both China and the U.S. makes it particularly susceptible to risks associated with tariffs.
As the largest automotive exporter by value from the U.S., the company ships more than half of its German-made vehicles to markets outside the European Union.
However, escalating trade barriers are adding pressure, with impending additional tariffs from both the U.S. and the EU expected to further complicate the situation.
Already facing stiff competition from rapidly growing Chinese EV manufacturers, BMW is navigating an increasingly difficult global trade environment.
Daniel Schwarz from Stifel Research weighed in on the company’s growing reliance on the U.S. market, stating, “In an environment where China has become a much more difficult market, and no improvement in sight, the dependency on the U.S. has increased.
Tariffs are therefore a significant risk.” He suggested that ramping up U.S. production could help offset some of the impact, though it would come with increased costs.
Financial Performance and Outlook
In 2024, BMW experienced a sharp decline in net profit, which fell by more than a third to 7.68 billion euros, aligning with market expectations.
The company attributed its weaker performance to sluggish sales in China and Germany, along with delivery delays caused by a brake issue.
Additionally, BMW cautioned that higher fixed costs associated with unwinding inventory would negatively affect its fourth-quarter earnings, which saw a 41% drop in profit.
Despite these setbacks, BMW proposed an increased payout ratio of 36.7%, one of the highest in its history.
The company declared a dividend of 4.32 euros per preferred share for 2024, though this was lower than the 6.02 euros distributed the previous year.
Meanwhile, Tesla Inc. has surpassed Audi in global sales for 2024, marking a significant milestone as it outpaced one of Germany’s leading luxury car brands, even though its total deliveries fell short of analysts’ expectations.