BMW and Hyundai report sharp falls in car sales

BMW expects the coronavirus pandemic to hit demand and earnings throughout this year, prompting the German automaker to cut its profitability forecast for passenger cars following a drop in first-quarter deliveries.

The firm forecast a margin on automotive earnings before interest and taxes of 0% to 3% this year, versus the 2% to 4% seen before demand was crippled by worldwide restrictions on movement to tackle the virus.

The company no longer expects to achieve positive free cash flow from car sales this year, Chief Financial Officer Nicolas Peter said.

Like rivals, BMW also said it would throttle back investments to preserve cash. A €12 billion cost savings and efficiency plan will be extended, it added, without providing further details.

“In light of the current situation, we will be delaying a number of projects, like the plant in Hungary. Other projects will be carefully reconsidered,” Peter said.

BMW’s forecasts are the latest sign that profitability at traditional automakers is on the wane, as they spend huge sums to clean up combustion engines in the face of increasingly stringent emissions regulations as well as rising competition from electric vehicle specialist Tesla.

Last week, Tesla said its automotive gross margin rose to 25.5% in the first quarter from 20.2% a year earlier, due to a 40% rise in deliveries, helped by demand for its Model Y crossover utility vehicle.

By contrast, BMW’s passenger car deliveries fell 20.6% to 477,111 cars in a quarter blighted by the virus outbreak.

South Korea’s Hyundai said its provisional April sales fell 57% to 159,079 vehicles globally, as the coronavirus pandemic and efforts to curb its spread sharply contracted auto demand and dealership traffic.

Hyundai said last month it expects only a modest recovery in Chinese auto demand and weak sales elsewhere this year after first-quarter vehicle sales fell by 18%.

Bloomberg - Reuters