BMW cuts 2018 guidance on trade war concerns

BMW’s pricing and production are apparently getting hit by the escalating global trade war, and now, the German carmaker is being forced to cut down its fiscal 2018 guidance. In addition, the implementation of Europe’s new emission standards is also likely to create new expenses that would hurt the carmaker’s top and bottom line in 2018.

BMW lowered its annual group EBIT estimates to a moderate year-over-year decline from the prior forecast, driven by uncertainty in the Automotive segment created by the trade war.

The company also expects these circumstances to continue to hurt the Automotive segment in the third and fourth quarters. However, BMW has intensified the current product roll-out, ongoing costs, and efficiency measures to tackle the weakness.

Earlier in July, when the US and China were firing tariff shots at each other, BMW raised the prices of SUVs built in the US and shifted the production of certain models outside the country. The amounts that the company is expected to shell out in the product lineup is currently being expended in the form of tariffs.

Meanwhile, other automakers are also feeling the pressure from the escalating trade war. A few manufacturers have already shifted their production of certain models to China, though this is a costly exercise.

According to a recent IHS Markit data, the auto industry is bearing the brunt of the downtrend in demand. In September, manufacturing in the euro area increased at the slowest pace in two years and new export orders failed to rise for the first time since 2013.

More than half of the manufacturers are experiencing an impact from the US and Chinese tariffs, according to a survey from the American Chamber of Commerce in Shanghai and Beijing-based American Chamber of Commerce in China. The survey also found that the combined tariffs could lower profits and lift manufacturing costs by more than half of the automotive industry.

BMW: High tariffs bring price hike and production shift