BMW predicts €1 billion hit from trade tariffs
BMW predicts €1 billion loss from tariffs as trade war deepens
BMW warned that new trade tariffs could cut its 2025 earnings by up to 1 billion euros ($1.09 billion) due to rising trade tensions between China, the EU, and the U.S.
The company indicated that the financial pressures from tariffs on its China-made electric vehicles (EVs) and U.S. duties on steel, aluminum, and vehicle imports from Mexico are expected to influence its earnings margin for the cars segment, which is forecasted at 5-7% for the year, reports Reuters.
Despite the challenging environment, BMW executives remain cautiously optimistic. CFO Walter Mertl noted that the company’s outlook would be adjusted if the tariff situation changes.
Impact of Escalating Trade Conflicts
BMW’s reliance on exports from both China and the U.S. makes it particularly vulnerable to tariff-related risks. The company is the highest automotive exporter by value from the U.S. and exports more than half of its vehicles made in Germany outside the EU.
However, trade barriers are becoming more severe, with looming additional tariffs from both the European Union and the U.S. set to exacerbate the situation further. The carmaker, which already faces competition from fast-growing Chinese EV manufacturers, is finding itself caught in a challenging global trade landscape.
Stifel Research’s Daniel Schwarz commented on the growing dependency on U.S. markets, 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." However, he suggested that increasing U.S. production could mitigate some of the impact, although this would come at a higher cost.
Financial Performance and Outlook
In 2024, BMW saw a significant decline in net profit, dropping by more than a third to 7.68 billion euros, in line with market expectations. Weaker sales in China and Germany, as well as delivery delays due to a brake issue, contributed to the poor performance. The company also warned that higher fixed costs from unwinding inventory would hurt its fourth-quarter results, which showed a 41% profit drop.
Despite these challenges, BMW proposed an increased payout ratio of 36.7%, among the highest in its history, and declared a dividend of 4.32 euros per preferred share for 2024, though it was a decrease from the 6.02 euros paid out the previous year.
Reminder, Tesla Inc. has overtaken Audi, one of Germany’s premier luxury car brands, in global sales for 2024, despite delivering fewer vehicles than analysts had projected.
