BMW Shares Fall on Rising Costs

On Tuesday, BMW announced shares dropping due to rising costs for new models and technology for the rest of the year as they try to recapture whatever was lost to competitor, Mercedes-Benz. Other rivals such as Volkswagen’s Audi is also boosting their line up of high end and compact vehicles. Competition from Tesla and Land Rover has been pushing BMW out of the game as well.

"Significant upfront investment on research and development is necessary, both now and in the coming years," Chief Financial Officer Nicolas Peter said in the statement.

Last year, BMW reported third quarter profit falling 3% and forecasts that fourth quarter results will also take a blow due to hit showrooms this month as well as their new X2 and X7 models. The company has been spending money on electric and self driving technologies and also upgraded their line up of conventional models.

BMW shares fell 2.7% at 87.53 euros which marks the biggest drop on Germany’s benchmark DAX.GDAXI index. Third quarter operating group profit also dropped to 2.3 billion euros which is near the lowest 2.28 billion euro forecast in a Reuters poll. Following this, the company’s operating margin slipped as well to 8.3% in the July to September quarter compared to 8.5% last year.

Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt, said BMW’s quarterly performance was "weakish," pointing out that the boost to the overall guidance largely feeds from a strong first-half. "Compared to its key competitors, the result was less strong," he said.

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