BMW to focus on efficiency as second-quarter profit plunges 35%

BMW's second-quarter profit fell sharply as weaker sales in China and mounting cost pressures weighed on the German carmaker.

Net profit dropped 35% from a year earlier to €1.2 billion ($1.4 billion), while revenue fell to €31 billion from €34 billion, the company said on Thursday.

The figures came a day after plans emerged for BMW to cut 8,000 jobs worldwide, highlighting the group's drive to rein in costs.

The downturn was even steeper in its automotive division, where earnings before interest and tax (EBIT) plunged by more than 60% to €629 million.

BMW consequently earned more from its financial services business during the quarter than from manufacturing cars.

The company was hit particularly hard in China, where sales fell by almost a third in the second quarter amid intensifying competition in the world's largest car market.

It is a tough start for new BMW chief executive Milan Nedeljkovic, who was promoted to chief executive officer in mid-May. 

In less than three months in office, he has already had to issue a significant profit warning. On Wednesday, people familiar with the company said BMW intends to cut 8,000 jobs worldwide. The group is launching a voluntary severance programme in Germany, among other measures.

Nedeljkovic commented directly on the plans on Thursday, saying: "The challenges across the entire automotive industry are increasing rapidly: tough global competition, rising regulatory requirements and the impact of geopolitical conflicts will shape our business model in the coming years. That is why we must be lean and agile."

Chief financial officer Walter Mertl also pointed to intensifying competition, saying that "we are intensifying and accelerating our efficiency measures and tackling structural changes in a targeted manner."

For a long time, BMW appeared to have weathered the crisis slightly better than the other two major German automakers, Mercedes-Benz and Volkswagen. 

But now the problems are catching up with the Munich-based company. Still, in terms of second-quarter profits, it remains ahead of its archrival in Stuttgart, Mercedes.