BMW warns of lower profits on new emissions rules and an escalating trade war 'distorting demand'

Key Points
  • BMW expects 2018 revenues and profits to fall from the previous year.
  • The automaker cited challenges implementing new emissions tests, and trade tensions.
A visitor of BMW World walks past a BMW car during the annual accounts press conference of German car manufacturer BMW at the BWM World in Munich, Germany.
Andreas Gebert | Anadolu Agency | Getty Images

Shares of BMW fell 5 percent Tuesday after the automaker warned investors its 2018 revenues and profits will likely fall due to the costs of implementing new emissions standards in Europe and rising uncertainty stemming from the escalating global trade war.

Automotive revenues are now expected to fall slightly from the 88.6 billion euros ($104.4 billion at the current exchange rate) it generated last year, the company said. It previously told investors sales would rise.

BMW had also previously forecast profits to be on par with last year, but now expects a "moderate decrease," the company said. The company earned 10.7 billion euros ($12.6 billion at the current rate) in 2017.

"The continuing international trade conflicts are aggravating the market situation and feeding uncertainty," BMW said in a statement. "These circumstances are distorting demand more than anticipated and leading to pricing pressure in several automotive markets."

The German automaker also said the industry's shift to a new laboratory test for emissions, the Worldwide Harmonised Light Vehicle Test Procedure, has created "supply distortions in several European markets and an unexpected intense competition."

BMW had already expected 2018 to be a challenging year, due to the more than 1 billion euros in investments it is making in mobility, along with currency headwinds.

Fellow German automaker Daimler had warned at the end of July that the heightening trade war between the U.S. and China could affect its profitability this year. Both automakers have factories in the United States, where they build vehicles for both the U.S. market and for export.

WATCH: How automakers sell a $71,000 version of a $27,000 car

How automakers sell a $71,000 version of a $27,000 car