German automakers BMW and Volkswagen have both reported declining profits in their second-quarter results for 2024, largely due to increased competition and weakening demand in the crucial Chinese market.BMW’s net profit fell by 8.6% to €2.7 billion, with car deliveries dipping by 1.3% to 618,743 units. The company’s operating profit margin decreased by 0.8 percentage points to 8.4%, falling short of analysts’ expectations of 8.7%. BMW cited heightened competition and weaker consumer sentiment in China, where deliveries were down 4.7%.Similarly, Volkswagen’s second-quarter operating profit decreased by 2.4% to €5.46 billion. The company’s profit fell by 4.2% to €3.63 billion, despite a 4.1% increase in revenue to €83.3 billion. Volkswagen is currently in the midst of a €10 billion savings drive, with cuts of up to €4 billion due in 2024.Despite these challenges, both automakers are maintaining their full-year forecasts and expecting improvements in the latter half of 2024. BMW CEO Oliver Zipse stated that e-mobility will be ‘our primary growth driver’, with the company expecting a slight growth in overall car deliveries due to sustained demand for premium vehicles and new model introductions. BMW is particularly optimistic about its new 5-series model, which is expected to boost sales in the second half of the year.Volkswagen, while cutting its profit target for the year from 7.0-7.5% to 6.5-7.0%, is counting on a record number of model launches in the second half of the year and will continue to implement its cost reduction program. The company is also revamping its line-up globally with bespoke EV models, particularly for the Chinese and U.S. markets.Both companies acknowledged the need for significant cost-cutting efforts. BMW pointed to ‘increased manufacturing and personnel costs’ during the period, while Volkswagen’s Chief Financial Officer Arno Antlitz stated, ‘A return of 6.3% after six months is too low. We will have to make significant cost-cutting efforts in the second half of the year and beyond in order to achieve our goals’.The challenges faced by BMW and Volkswagen reflect broader issues in the global automotive industry, particularly in the electric vehicle market. While BMW reported a 22% surge in battery-electric vehicle deliveries in the second quarter, Volkswagen saw a 1.4% decrease in electric vehicle deliveries to 317,185 units.As both companies navigate these challenges, they remain cautiously optimistic about the future, banking on new model launches, cost-cutting measures, and a potential stabilization of the Chinese market in the third quarter to improve their performance in the latter half of 2024.
Key points
- BMW’s net profit fell by 8.
- Both companies cited increased competition and weakening demand in the Chinese market as primary factors for their profit declines.
- Despite challenges, both automakers are maintaining their full-year forecasts and expecting improvements in the latter half of 2024, driven by new model launches and cost-cutting measures.
6% to €2.
7 billion in Q2 2024, while Volkswagen’s operating profit decreased by 2.
4% to €5.
46 billion.
Contradictions👾While BMW reported a 22% surge in battery-electric vehicle deliveries in the second quarter, Volkswagen saw a 1.
4% decrease in electric vehicle deliveries, indicating divergent performances in the EV market.
