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BMW plans to cut costs after warning on profits

BMW expects group pretax profit to drop by over 10 percent this year and plans a sweeping 12 billion euro ($13.6 billion) savings and efficiency strategy to help offset higher technology investment and currency expenses.

The German automaker last week reported a 7.9 percent drop in 2018 operating profit and said it would step up efficiency measures in anticipation of a difficult year in a sector grappling with the shift toward electric vehicles, Brexit uncertainty and worldwide economic worries.

Group revenues before tax are expected to be highly below 2018 levels, the company cautioned on Wednesday, leaving analysts wondering about a broader slump in auto industry profitability. BMW shares dropped 5 percent.

“If BMW is facing this kind of difficulty and feels the need to guide this cautiously, what does this tell us about the rest of the sector?,” Bernstein Research analyst Max Warburton stated.

Mercedes has far fewer new products, whereas Audi seems to be dealing with more pricing pressure and VW is surely raising its development spending faster, according to Warburton.

BMW was the sole German premium automotive brand to buck a slump in demand in China and the United States in 2018, and reaffirmed it expected vehicle deliveries to increase again in 2019 because of a rollout of new BMW 3-series, X5 and X7 models.

“Depending on how conditions develop, our guidance may be subject to additional risks; in particular, the risk of a no-deal Brexit and ongoing developments in international trade policy,” BMW Chief Financial Officer Nicolas Peter stated.

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