BMW Warns on Margins as Sales, Profits Rise

BMW AG’s third-quarter unit sales rose 7% to a record 583,500 vehicles. Revenue advanced only 3% to €21.6 billion ($23.9 billion), held down by currency actors and slowing growth in the U.S. Net profit grew 15% to €1.8 billion ($2 billion).

But group earnings before interest and taxes advanced only 1% to €2.4 billion ($2.6 billion) in July-September. BMW says a 24% gain to €576 million in EBIT for the company’s financial services offset a 4% drop to €1.8 billion for automotive operations.

The company cautions that its return on sales will be burdened in coming years by the rising costs of electrifying its powertrains, recalling vehicles equipped with Takata Corp. airbags and pursuing advances in connectivity, autonomous driving and mobility services.

Return on sales from BMW’s carmaking operations shrank to 8.5% in July-September from 9.1% in the same period last year.

Analysts say rivals Audi and Mercedes-Benz have delivered stronger results and gained market share because they have fresher models—notably SUV/crossovers—in their product lineups. Mercedes sales, for example, rose 11% to 565,600 units in the third quarter, and its profit margin expanded by one percentage point to 11.4%.

Still, BMW affirms its target for a full-year pretax margin between 8% and 10%. The company anticipates “slight” gains by its automotive operations in unit sales, revenue and pretax profit.