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BMW plans to streamline product portfolio and increase profit margins

2021-01-25

According to reports, BMW Chief Financial Officer Nicolas Peter said that as the global economy recovers, BMW hopes to restore operating margins to pre-epidemic levels, but the large investment in electric vehicles means that the company will have to simplify its model portfolio .

Peter said that due to the latest epidemic lockdown measures, the company's order volume has declined. But he added: "If daily activities start to resume after mid-February, our first quarter performance should be able to maintain within a reasonable range."

The improvement of market conditions, the Brexit agreement between the UK and the European Union, and BMW’s plan to increase the share of its joint ventures in China from 50% to 75% in 2022 will all help BMW achieve its operating profit margin target, namely From 8% to 10%.

Peter said in an interview at BMW's Munich headquarters: "We are not discussing the distant future. This is our short-term goal after systematic research." BMW will announce its 2021 profit margin target in March. BMW's operating profit margin in 2020 should be between 2% and 3%.

Peter said that as the world's largest auto market, sales of high-end cars in China have soared, providing much-needed help to BMW's business. In addition, the recovery of the Chinese market has also boosted the performance of Daimler and Volkswagen.

The transition of the product portfolio from gasoline and diesel models to electric vehicles in order to comply with Chinese and European emission standards and to compete with Tesla requires a lot of money. This is also the merger of PSA and FCA into the world's fourth largest car company Stellatis One of the driving factors.

As automakers invest in electrification and autonomous driving technologies, it is expected that the market will usher in further consolidation. But Peter said that BMW has the ability to complete this transition on its own. He said: "We are very confident that we can do this ourselves."

Peter said, but the development cost of electric vehicles is very high, and its sales currently account for only a small part of the total sales, so for BMW, the profit margin of this model is low. He said: "So investment is very important. We need to achieve another level of cost through a variety of ways, especially in cells and batteries."

Therefore, BMW is embarking on streamlining its model portfolio, reducing engine types and options for different vehicles, eliminating functions that are not commonly used by car owners, and comprehensively transforming the software to focus on simpler and more efficient ways to build cars. In 2020, BMW's global electric vehicle sales will increase by 31.8% year-on-year. The company said it plans to double the sales of pure electric vehicles within this year.

Previously, BMW regarded other German automakers as competitors, but Peter said that now BMW is increasingly looking for inspiration from San Francisco companies and Chinese companies such as Weilai that focus on the interaction between vehicles and drivers. He said that the survey showed that two-thirds of Chinese consumers said that if they had a better digital experience, they would buy other brands and products. Peter said: "These are issues that must be paid attention to."