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BMW Q3 hit by upfront expenditure for electric car development

Reuters  |  FRANKFURT 

(Reuters) - German carmaker on Wednesday reported a 27 percent drop in third-operating profit to 1.75 billion euros ($2 billion), missing expectations amid currency headwinds and higher research and development expenses.

Analysts in a poll had on average expected earnings before interest and taxes (EBIT) to come to 1.795 billion euros.

shares fell 2.6 percent in early trade.

said that despite a slight rise in deliveries of luxury cars, its operating return on sales for the automotive division narrowed to 4.4 percent from 8.6 percent a year earlier, well below its targeted range of 8 to 10 percent.

Earnings were hit by higher raw material prices, currency effects, higher provisions for goodwill and warranty measures, tariffs between and the and a price war in Europe, the carmaker said.

BMW made provisions of 679 million euros for vehicle recalls in the third

In order to secure enough raw materials for batteries, BMW said it will purchase specific raw materials such as cobalt, and then make them available to battery cell suppliers.

BMW is establishing a with Swedish and Belgium's to develop a for battery cells in Europe, including development, production and ultimately recycling.

Last month BMW warned its pretax profit would fall this year, against earlier expectations for a flat outcome, and cut its profit margin guidance for cars, blaming intense price competition.

"Compared with 2017, additional upfront expenditure of around 1 billion euros for the mobility of the future and a high three-digit million euro negative impact from exchange-rate and raw materials price developments had been factored into expected earnings for the year," BMW said.

BMW had fewer problems than rivals and in terms of selling that conform to the new Worldwide Harmonised Light Vehicle Test standard (WLTP), but the onset of the rules has led to supply distortions and heavy discounting in some markets.

($1 = 0.8747 euros)

(Reporting by Edward Taylor, editing by Riham Alkousaa and Louise Heavens)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, November 07 2018. 16:14 IST