Swap a lease: BMW increases spending, Q2 profits fall 6%

BMW reported a 6.3% dip in second quarter profits at a quarterly conference in Munich.

Earnings after taxes came out to $2.43 billion down from $2.58 in the previous year. The loss is result of the emerging trade war between the U.S and China along with increased spending develop electric and autonomous vehicles.

While it’s too early to know the impact, China retaliated to tariffs imposed with a 40% tax on US car imports forcing BMW to raise prices 4-7% on X-5 and X-6 models made in South Carolina. The impact on sales is expected to be minimal and BMW has no plans to reduce or relocate production in the United States or because of tariffs.

Despite decreased profits, BMW has seen an increase in vehicle sales, up 4,000 in the second quarter. The German Automaker prides themselves on their flexibility, claiming their long-term strategy has helped protect them from tariffs. Amid trade disputes, Harald Kruger says the company endures through the build up of local production. Vehicles are produced where BMW sells them: Asia, Europe, and The Americas.

Attributing to lower profits, BMW has been stepping up their investments. The automaker spent $50 million towards an expansion project and 2.61 billion euros on research and development focused on new technology. A key area of the spending has been on electric cars for which BMW has seen a 42% increase in sales.

Recently, the US and Europe made a trade agreement to hold off on tariffs until further talks. Kruger views this as a good step and is hopeful that trade talks “can be carried out in a constructive dialogue.”

While the Q2 decrease in profits may indicate otherwise, BMW remains the largest U.S exporter and they maintain their $600 million dollar plans to expand the Spartanburg plant, ramping up X production 450,000 cars a year.

Volkswagen may have to recall 124,000 cars for presence of poisonous cadmium

Germany’s auto industry has had a great year with a bright future ahead, but not every automaker is experiencing success. Following a massive emissions scandal, German automaker Volkswagen attempts to rebuild trust in the brand but is faced with a new crisis.

Reportedly, the presence of Cadmium, a poisonous heavy metal, was cited in the charger component of electric and hybrid cars. According to German magazine Wirtschaftswoche, Volkswagen may have to recall up to 124,000 vehicles of this kind. Audi and Porsche vehicles, the luxury brands of Volkswagen group, are included in the range of cars in question.

Cadmium is carcinogenic and therefore banned in most auto industries. With 0.0008 grams of the toxic metal each in charging device in question, Volkswagen indicates users would be protected from exposure during the vehicle’s life due to strong insulation. Allegedly, VW’s supplier never mentioned cadmium content and Volkswagen was unaware of it’s presence in the chargers.

Volkswagen is complying with the German Federal Motor Transport Authority and stated that if necessary, they will recall the vehicles. If Volkswagen recalls the vehicles, they will be faced with the major concern of safely disposing of cadmium waste.

In the meantime, series production and delivery of said vehicles was halted immediately. A new supplier replaced the charging component and production has since proceeded, cadmium free.

Volkswagen seems to have hit a rough patch and the presence of cadmium is the latest to join the long list of problems threatening profits. Now is a seemingly fit time for the VW Group to reconsider plans moving forward.