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BMW chooses investment in emerging markets over profit growth in 2013

AP Photo / Matthias Schrader
By Matt Phillips
Published Last updated This article is more than 2 years old.

Global auto giant BMW largely shrugged off the softness in its core European markets, to post record profits of €5.12 billion ($6.62 billion) in 2012. Not too shabby. Especially after the gaping drop-off seen during the Great Recession.

BMW officials didn’t offer too much color in their earnings release today, which they pre-announced last week. A conference call is slated for tomorrow. But BMW’s statement did tamp down slightly on optimism for 2013, forecasting annual profits this year will likely be flat thanks to higher spending on new technology, models and upgrades to its manufacturing network.

Some of that capital spending will continue reinforcing the company’s manufacturing base in growth markets like China. As part of a joint venture with a Chinese carmaker called Brilliance, BMW opened a new plant in the northeastern Chinese city of Tiexi in May, as BMW aims to churn out roughly 400,000 units a year.

Besides the obvious growth potential of the Chinese market, comments from BMW executives suggest that Chinese luxury car buyers might be less interested in dickering over prices than their western counterparts. ”China certainly stands out because of its extraordinary growth dynamics, which are to be found nowhere else in the world right now,” BMW chief executive Norbert Reithofer told Deutsche Welle last year. He added, “And we also know that in China’s premium goods sector, we can implement good prices.  So China is an important leg for us to stand on.” BMW will also be shelling out about €200 million ($260 million) to build a plant in the southern Brazilian state of Santa Catarina, which is expected to go online in late 2014.

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