Bayerische Motoren Werke AG, commonly referred to as BMW, has slashed its guidance for calendar year 2024 on decrease in deliveries and muted demand from China, one of its key overseas market.
The German automobile giant expects its Ebit margin for automotive segment to decelerate to 6-7%, as against 10.8% reported in 2023, it said in an investor presentation. The Ebit at group level is also expected to decrease significantly.
The carmaker sees capital expenditure ratio to be above 6% in 2024, as against 5.7% in 2023. The research and development ratio is likely to be greater than 5% this year, driven by technological changes, it said. In 2023, the ratio stood at 5%.
BMW further expects free cash flow in the automotive segment at €4 billion in 2024, which is lower than €6.9 billion reported in 2023.
The company plans to finalise its share buyback program, of up to €2 billion by December 2025, it said.
Delivery Hassels
BMW's guidance cut was triggered, in part by additional headwinds in the automotive segment resulting from temporary delivery stops and technical actions linked to the integrated braking system that is provided by a supplier.
The delivery stops for vehicles that are not already in customer hands will have a negative worldwide sales effect in the second half of the year. The IBS-related technical actions impact over 1.5 million vehicles and will result in additional warranty costs in a high three-digit million amount in the third quarter, BMW said.
At the same time, the ongoing muted demand in China is affecting sales volumes. Despite stimulus measures from the government, consumer sentiment in the Asian economy remains weak, it said.
Shares of BMW plunged on the bourses on Tuesday, with the scrip settling 8.7% lower in Frankfurt.
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