BMW joins other carmakers in Ukraine crisis output warning

Key Points
  • BMW lowered its profit margin expectations for its automotive segment for 2022 due to the war in Ukraine, the German carmaker said on Wednesday.   
  • BMW Group now predicts growth of earnings before interest and taxation (EBIT) in its car segment in a range of 7-9% due to the war's effects on production.

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BMW chief talks Ukraine, supply chains and long-term strategy
BMW chief talks Ukraine, supply chains and long-term strategy

BMW cut its car division's 2022 profit margin forecast on Wednesday, the latest automaker to warn of problems from ongoing chip shortages and new supply chain disruptions as a result of Russia's invasion of Ukraine.

BMW Group said it now expects an earnings before interest and taxation (EBIT) margin of 7-9% for its car business rather than 8-10%, due to the impact of the unfolding Ukraine crisis.

Russia's invasion of Ukraine and COVID-19 related disruptions in China have forced carmakers from Toyota to Tesla to shutter plants and raise prices, with many warning of further changes if circumstances do not stabilize.

BMW said that while it was still able to source some parts from western Ukraine and was engaging suppliers in other locations worldwide to keep up production, further interruptions were to be expected in coming weeks.

The German carmaker, which sold a record 2.52 million vehicles last year despite semiconductor shortages, had a 10.3% EBIT margin for 2021, its highest since 2017.

It had expected to deliver an even higher number of vehicles this year, it said, but now expects to be on par with 2021.

BMW said the war in Ukraine made it difficult to give accurate guidance for 2022 and that it could not factor any potential long-term implications into its forecast.

The carmaker, which more than doubled pre-pandemic earnings in 2021 to 16 billion euros ($17.67 billion), said it expects a significant increase in pre-tax profit for the current year as a result of the full consolidation of BMW Brilliance in China.

Tesla raised prices twice in a week due to rising raw material costs, and Volkswagen warned its outlook could be revised within a month if it did not lock down new suppliers for wire harnesses previously made in Ukraine.