BMW expects 1 billion euro hit to earnings from escalating tariffs

By Victoria Waldersee

BERLIN (Reuters) -BMW said newly imposed trade tariffs could dent the carmaker's earnings by 1 billion euros ($1.09 billion) this year, as escalating trade tensions between China, Europe and the U.S. take a mounting toll on global companies' finances.

The premium carmaker forecast an earnings margin for its cars segment of 5-7% in 2025, factoring in the impact of a full year of EU duties on its China-made EV, and U.S. duties of 25% on steel and aluminium and on vehicle imports to the U.S. from Mexico.

Further tariffs looming from the European Union and the United States would have a far greater impact on the carmaker, which is the highest automotive exporter by value from the U.S. and exports over half its vehicles made in Germany outside the EU.

Still, executives struck an optimistic tone in a press call at the German group's annual results conference, saying they did not expect the tariffs to remain in place for the whole year.

"If the situation changes, so does our outlook," CFO Walter Mertl said.

BMW's shares were up 0.7% at 1145 GMT, compared to a 1.6% rise in Germany's DAX index, which was buoyed by news of a German debt deal.

PROFIT SLUMP

Germany's premium carmakers who have long relied heavily on strong China sales and U.S. exports are battling a war on two fronts, as fast-growing EV competitors in China win market share and Donald Trump's tariffs upend their global supply chains.

"In an environment where China has become a much more difficult market, and no improvement in sight, the dependency on the U.S. has increased. Tariffs are therefore a significant risk," said Daniel Schwarz of Stifel Research.

"The impact can be mitigated by producing more in the United States. But this comes at a cost," he added, pointing to the scale advantages of BMW's current set-up which focuses on SUV production in the U.S. and sedans in Europe.

Still, unlike its competitors Porsche, Mercedes-Benz, and Volkswagen's Audi, BMW says it is not undertaking a major restructuring of its European operations to lower costs.

Operational costs peaked in 2024 and there are no plans to cut staff in Germany, executives said on a press call.

BMW's net profit slumped by over a third in 2024 to 7.68 billion euros, in line with market expectations, after weak sales in China and Germany as well as delivery hold-ups, because of problems with a brake, dented performance.

Fourth quarter profit dropped 41%, in line with warnings from the carmaker in January that higher fixed costs from unwinding inventory would hit its earnings in the last three months of 2024.

The group proposed an increased payout ratio of 36.7%, among the highest in its history, consisting of a dividend of 4.32 euros per preferred share for 2024, still down from 6.02 euros paid out for the previous year.

($1 = 0.9217 euros)

(Reporting by Victoria Waldersee; Editing by Sonia Cheema, Mark Potter and Susan Fenton)