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.