Chairman of the Board of Management of BMW AG (part I)
Ladies and Gentlemen,
Good morning and welcome! I’d like to start by talking about how I
view the BMW Group’s current position. I have been with this company
for 26 years. During this time, we have experienced many challenges
and trends, and undergone various transformations.
At the BMW Group, we have always managed to reinvent our business.
The same applies to the financial year 2017: We achieved all of our
targets. We delivered more than 2.4 million automobiles and over
164,000 motorcycles last year – a new all-time high.
The BMW Group is the clear number one in the premium segment – and
has been for the past 14 years. We aim to make 2018 our ninth record
year. For deliveries and revenues in the Automotive segment we are
again striving for new all-time-highs. I am certain: The BMW Group has
a promising future. This company will definitely be instrumental in
shaping future mobility.
There are four good reasons for this:
First: The success of the BMW Group is based on its four strong
brands: BMW, MINI, Rolls-Royce and BMW Motorrad. They all stand for
premium and luxury. Customers all over the world value our products
and services. This is reflected in Fortune’s current ranking of the
“World’s Most Admired Companies”: The BMW Group is in the Top 20. We
are not only the best car company, but also the best European company
in this well-known ranking.
Almost 90 percent of our vehicles are sold outside Germany. The
biggest model offensive in our history is currently in full swing. We
are now in phase two. We will be releasing another 20 new and revised
models this year.
In other words, a major offensive. You can see our new BMW design
language in highly-emotional products like the 8 Series models, the Z4
and the i8 Roadster.
Customers can also choose from a wide range of different drive
trains: From fully-electric and plug-in hybrid to highly-efficient
Second: We will get to know our customers even better and inspire
them even more. We will continue to put the customer at the heart of
all we do. Our approach is consistently customer-centric.
Third: The BMW Group will lead the technological change. We will be
setting new strategic directions for this in 2018. Soon, we will be
opening our campus for autonomous driving outside Munich. Over the
course of the year, we will present a number of pure-electric concept
vehicles that will all go into series production, like: The first
all-electric BMW – the iX3. Our new technology flagship, the BMW
iNEXT, the captivating BMW i Vision Dynamics, which I just announced
in Geneva as the BMW i4. We will produce both the iNEXT and the BMW i4
in Germany. These models are proof of our innovative strength. Last
year alone, we invested almost a billion euros more than in 2016. At
the same time, we spent nearly a billion euros more on research and development.
Fourth: The BMW Group is operating at a totally different level of
performance and global presence than it did just a few years ago.
Thanks to our financial strength, we have the resources to manage the
transformation towards sustainable and digital mobility. To achieve
this, we are enabling our worldwide team. We have invested more than
2.5 billion euros in vocational and professional training for our
associates since 2009. BMW Group associates all share a spirit to
succeed. Every kind of competition spurs us on.
Our future is definitely electric. With our electric vehicles and
plug-in hybrid models, we are already the clear number one in Europe.
Efficient Dynamics and our modern diesels will also play a role on the
road to sustainable mobility. Last year we sold fewer diesels in
Germany and the UK.
As you know, they produce less CO2 than petrol vehicles.
Despite this, we were still able to lower our CO2 emissions
in Europe to 122 grams per kilometre.
For us, sustainable mobility also includes production and the supply
chain: More than 80 percent of the electricity we purchase worldwide,
already comes from renewable energies. In Europe, we achieved
completely CO2-free production for the first time in 2017.
By 2020, we also plan this for our locations worldwide. BMW i shows
that: Our responsibility goes far beyond the car. We look at the
entire value chain.
Ladies and Gentlemen,
Experience has shown that in volatile times, leadership, financial
strength and a clear focus are more important than ever. Profitability
remains top priority. Strategy NUMBER ONE > NEXT is our roadmap for
future goals – including: Customer satisfaction. Innovative strength
for future mobility. And being an attractive company for young
talents. A perfect example of this is seen in China, where we were
voted the top employer across all industries.
Dr Nicolas Peter
Member of the Board of Management of BMW AG, Finance
Good morning, Ladies and Gentlemen, and a warm welcome.
Despite a volatile environment, the BMW Group achieved another record
year in 2017. We may not be participating in the space race, but once
again we deliver on our down-to-earth targets. For the eighth
consecutive year, the EBIT margin for our core business was within our
target range of 8-10%, at 8.9%. We achieved this despite spending
significantly more money on research and development in 2017 than ever
before. A company that delivers such a consistently high level of
performance like the BMW Group can continue to achieve many great
things in the future. Especially in these volatile times, innovation
is key. For this, it is essential to remain profitable, be steadfast
and have a consistent strategic direction.
Now let’s take a look at the business figures for last year. The
Group EBT margin for 2017 was 10.8%. This also underlines our
continuity: In each of the past seven years, we have consistently met
– or exceeded – our target of 10%. Group revenues climbed to 98.68
billion euros. This increase of 4.8% over the previous year largely
stems from higher volumes. Revenue development was dampened by
currency effects, however, mainly due to the weaker US dollar and
Pre-tax earnings topped the 10-billion-euro mark for the first time –
reaching nearly 10.7 billion euros. This also reflects our strong
operating performance at Group level. This 10.2% increase is slightly
higher than we forecast at the start of the year, due also to high
positive effects in the financial result.
Most notably: The strong performance of our Chinese joint venture,
BMW Brilliance: Its earnings contribution increased by 124 million
euros to 631 million euros, driven by new models such as the BMW 5
Series and the X1. A tailwind of 183 million euros from new investors
acquiring a stake in the mapping service HERE. The lower tax rate of
18.3% was mainly due to remeasurement of deferred taxes as a result of
the US tax reform. Without this effect, the effective tax rate would
have been around the same level as last year. As a result, net profit
for the financial year 2017 reached over 8.7 billion euros. For the
coming years we continue to expect a tax rate of around 30%.
The BMW Group posted a very strong fourth quarter, despite a
significant increase in costs for future-oriented projects. Group
revenues rose by 4.3% to around 26 billion euros. Group earnings
before tax increased significantly to 2.17 billion euros. This
increase resulted from the positive development in our operating
business, solid earnings of our Chinese joint venture, and negative
valuation effects in the previous year in the other financial result.
Despite high upfront investments, the EBIT margin for the fourth
quarter was slightly above last year´s level, at 8.4%.
Ladies and Gentlemen,
If we want to be at the forefront of future developments, we need to
invest today. There is no standing still for us. On the contrary: We
are intentionally maintaining a very high level of investment. At 4.69
billion euros, Group capital expenditure for 2017 was almost a billion
euros higher than the previous year. We are expanding and modernising
our production network, be it in Germany, Mexico, the US, South Africa
or China. At the same time, we are investing heavily in the expansion
of our development locations worldwide.
Flexible architectures and the integration of electrified vehicles
into our existing production network will enable us to respond quickly
to changes in customer demand.
We have set up our own development campus for autonomous driving just
outside Munich, where we are working closely with strong partners from
the IT and supplier industries and other OEMs. And we are also
strengthening our expertise in battery-cell research, with investments
in the three-digit million-euro-range over the coming years.
The capex ratio for 2017 increased to 4.8%, reflecting the high
upfront investments. In 2018, we will continue to make major
investments to secure the future competitiveness of our locations
worldwide. We are therefore assuming a capex ratio of up to 5% for
this year. Research and development expenditure also rose
significantly in 2017, to 6.11 billion euros. This is almost a billion
euros higher than the previous year. The R&D costs recognised in
the income statement increased by 626 million euros year-on-year. In
addition to upfront investments in the development of flexible vehicle
architectures, this amount also includes preparations for new models
like the BMW X3 and M models.
The latest generation of our infotainment, communication and driver
assistance systems will be released onto the market in 2018. And of
course, we will continue to focus our efforts on further development
of our electric drive trains and autonomous driving.
The R&D ratio for 2017 rose to 6.2% and, as previously announced,
was therefore above our target range of 5 to 5.5%. Due to the high
upfront investments necessary for the second half of the model
offensive and new technologies, we expect the ratio for 2018 to be
between 6.5 and 7%.
In the following two years, it is likely to remain above our target
range, but lower than in 2018.
Despite these significantly higher upfront investments for future
technologies, the BMW Group met or exceeded all of its targets for the
financial year 2017.
Our shareholders will also benefit from these strong results. The
Board of Management and Supervisory Board will therefore propose a
dividend of 4.00 euros per share of common stock and 4.02 euros per
share of preferred stock for 2017. This will be the highest dividend
the BMW Group has ever paid in its history, with a total dividend
pay-out of 2.63 billion euros. As a result, 30.2% of our net profit
for the year will be paid out to shareholders.
Let’s now turn to the individual segments, starting with the
Automotive Segment. Our core business continued on its successful
course in 2017. Segment revenues increased slightly in 2017, as
forecast, to 88.58 billion euros. Adjusted for negative currency
translation effects, revenues rose by 3.9%, in line with deliveries.
The segment EBIT reflects our operating strength: In 2017, EBIT for
the segment reached a new all-time high of more than 7.86 billion
euros. The EBIT margin of 8.9% remained on a par with last year and
within our target range, as planned – despite the extensive upfront
investments for future projects. Unlike other manufacturers, our
margin encompasses only a portion of our very profitable operating
business in China.
In the operating income bridge, you can see the main effects that
contributed to the positive EBIT development for the year. Our new
models have been well received by customers. Volume and mix effects –
including the launch of the new 5 Series – had a positive impact.
Other operating income and expenses reduced earnings by 373 million euros.
This item mainly covers additions to provisions for legal disputes
and other litigation risks, which are not related to the cartel allegations.
Our forward-looking hedging strategy for currencies and commodities
is paying off. As expected, these effects produced a tailwind in the
low three-digit-million-euro range compared to 2016.
Other cost changes resulted in a negative effect of 370 million euros
– mainly due to the high research and development costs already
referred to and higher personnel costs. Significant improvements from
ongoing efficiency measures are partly compensating this. These
measures include constantly refining and streamlining our core
processes. We are also simplifying the structure of our product and
service offering. In this way, we were able to compensate overall for
the high level of spending on future-oriented projects in 2017.
Let us turn to the cash flow statement. Free cash flow in the
Automotive Segment remained strong in 2017, at 4.46 billion euros,
despite significantly higher investment. The level of investment will
increase again in 2018. However, due to the positive business outlook,
we expect to maintain a healthy free cash flow of more than three
billion euros for the current year.
Financial strength and flexibility are the hallmarks of the BMW
Group. These are the success factors that enable us to keep
independently charting our own course. The BMW Group’s liquidity
position remains very solid. At the end of the year, Group liquidity
totalled 14.5 billion euros. As a result, we are well prepared for
volatility in the financial markets, as well as political and economic
challenges. With sustained high profitability and solid finances, we
once again earned our investors’ trust in 2017. We continue to have
the second-highest rating of any car company worldwide.
That brings me to the Financial Services Segment, which relies on
having favourable access to the capital markets. Our Financial
Services business performed well in a highly competitive environment
The total number of new contracts with retail customers increased
slightly to 1.83 million contracts – with slight gains in credit
financing and a slight decrease in new leasing contracts. Leasing
accounts for about a third of our total new Financial Services business.
The total portfolio of financing and leasing contracts with retail
customers grew by 4.7% to around 4.93 million contracts. The
penetration rate of 46.8% was lower than the previous year – largely
due to regulatory limits on financing volumes in China. Pre-tax
earnings posted a slight year-on-year increase to 2.21 billion euros,
partly as a result of higher business volumes.
The risk situation for the entire segment portfolio remained stable
overall in 2017. The net credit loss ratio of 0.34% is still very low.
Residual value losses increased last year, as expected. This also
reflects the situation in the used-car markets in North America and
parts of Europe. As usual, we adjusted our residual value expectations
accordingly. These residual value risks are therefore fully covered
through our risk provisions.
Let’s move on to the Motorcycles segment, which performed very well
in 2017. The large number of new models boosted growth. For the first
time, deliveries increased to 164,000 motorcycles. The EBIT margin of
9.1% was within our target range of 8-10%. Pre-tax segment earnings
climbed above 200 million euros for the first time – a significant
increase of 10.8% over the previous year.
Intersegment eliminations, mainly of inter-segment profits between
the Automotive and Financial Services segments, reduced Group profit
by 528 million euros. This improvement over the previous year is
partly due to the lower volume of new leasing business in 2017.
In 2018, we expect the positive business development to continue in
all segments. The introduction of the new IFRS 15 accounting standard,
which is valid from 1 January 2018, will require a slight adjustment
of the comparative figures for the previous year for a number of our
KPIs. Our outlook for 2018 is therefore based on the adjusted figures
Let’s take a look at our key performance indicators in detail:
In 2018, we will set the course for continued growth. Despite
substantial upfront investments in future technologies and high
positive valuation effects in 2017, we are targeting Group earnings
before tax at least on par with the high level of the previous year.
In the Automotive Segment, we expect to achieve new all-time highs in
2018. As long as conditions remain stable, we should see a slight
increase in deliveries – from growth in China and the US, in
particular. Automotive Segment revenues should also increase slightly
in line with sales volume development. Despite strong headwinds, we
remain committed to keeping the EBIT margin within our target range of
8-10% in the Automotive Segment. This shows that we can combine a
clear focus on the future while having a high level of profitability.
In the Motorcycles Segment, thanks to its recently updated model
line-up, we anticipate a solid increase in deliveries in 2018. Here,
we also continue to target an EBIT margin of between 8 and 10%.
We expect another strong performance from the Financial Services
Segment this year. With growing capital requirements worldwide, return
on equity is likely to decrease slightly in 2018. Due to regulatory
requirements, we must continue to expand our equity base over the next
few years. We will therefore be targeting a return on equity of at
least 14% going forward. Our guidance assumes that economic and
political conditions will not deteriorate significantly.
The figures for 2017 confirm once again: The BMW Group has the right
foundation. Achieving this high level of profitability for eight years
in a row is no coincidence. It is the result of a strict orientation
towards performance and a clear strategic focus.
We are investing our profits in the future – and sending a clear
message to our customers. Our sustained high margins, financial
strength and consistency are also a signal for our current and future
investors. The BMW Group continues to follow its own path: focused,
determined and with a clear strategy. Thank you.
Chairman of the Board of Management of BMW AG (part II)
Ladies and Gentlemen,
Our guidance for 2018 clearly shows that: We are maintaining our
successful performance. It is our goal to create solutions and
innovations that inspire our customers. Strategy NUMBER ONE > NEXT
is the path to the BMW Group’s success over the long-term. It provides
a roadmap for our transformation towards sustainable and digital mobility.
On the one hand, we are focusing on operational excellence in our
core business and improving it.
On the other, we are making targeted investments in new technologies
and services. Everything we do, we want to do much faster. That is
very important to me and my colleagues on the Board. We are making
good progress with our strategy. You can see this in the decisions we
1. On the market side.
2. In our products, and
3. In our services.
Let’s take a look at the first point:
The BMW Group has a decisive advantage in an ever more connected
world: We are a global company through and through – and extremely
flexible. We have 30 production sites in 14 countries. We are already
producing electrified models at ten locations worldwide. Next year we
will also begin producing the all-electric MINI at Oxford. Also in
2019, our plant in Mexico will start production. Mexico has one of the
most open trade policies in the world – and has benefitted from this.
Our new plant will produce for the global market.
We want to remain in a strong position to take advantage of
opportunities in individual markets. To achieve this, we are
increasing our footprint in all major market regions.
Here’s a brief look at our most important markets:
In the US, we delivered more than 350,000 vehicles to customers last
year. In 2018, we expect to see slight growth. Spartanburg is our
biggest plant. We have invested almost nine billion euros in the site
so far, with another 600 million euros to follow between 2018 and
2021. Over 70 percent of the vehicles produced in Spartanburg last
year were exported. Most of those to China followed by Germany.
According to the US Department of Commerce, BMW Plant Spartanburg is
the leading US automotive exporter by value. We are proud to be
responsible for around 70,000 jobs in the US – including dealer
network and suppliers. The US is our second-largest purchasing market,
with a volume of 4.7 billion euros. None of this would be possible
without free trade.
China remains our largest single market with more than 595,000
vehicles sold last year. In China, we operate two car production
plants and one engine plant. In 2018, we are targeting solid growth
there. Here are two examples of how we are positioning ourselves in
China: We are stepping up our partnership with Brilliance as part of
our joint venture and have decided to build the new X3 in China,
starting in mid-2018. This high-volume vehicle will be the sixth
localised model. The popular long-wheelbase version of the new BMW 5
Series is now also available as a plug-in hybrid. Chinese customers
therefore have six different electrified models to choose from. This
gives us an excellent foundation for the years ahead. We recently
signed a “Letter of Intent” for a further joint venture, with Chinese
manufacturer Great Wall Motor. In the future, we also plan to produce
pure electric MINI vehicles in China.
Now let’s move on to Europe: We sell more vehicles in Europe than
anywhere else: The total number for 2017 was over 1.1 million. This
year, we expect another slight increase in sales. We invested more
than six billion euros in our German locations between 2012 and 2016.
The UK will remain an important production location for us – even
after it leaves the European Union.
As you can see: All over the world, wherever the BMW Group does
business, we create jobs. We are part of local value creation and make
a definite contribution to the society at large.
And now to my second topic: Products.
The BMW Group leads the premium segment worldwide. We are striving to
lead in all segments, where we are present. In phase two of our model
offensive, we will be making a huge push, focusing on two aspects:
Luxury and X.
Over the next 18 months alone, we will be launching eight new models
in the highly-profitable luxury segment. This summer, the new BMW 8
Series Coupé marks the start of a completely new model series: With
the 8 Series Coupé, Convertible and Gran Coupé, as well as the three
corresponding M models. The new BMW X7 is extremely spacious and has a
magnificent presence. Customers in the US, Asia and Russia have been
waiting for a vehicle like this. We will begin producing the X7 in
late 2018. Rolls-Royce is the pinnacle of luxury and elegance. The
same applies to the new Phantom and the Cullinan, the first
2018 will also be our X YEAR. Customers love the new X3. This year,
we will begin building it in South Africa and China, in addition to
Spartanburg. The cool-looking X2 has been scoring top marks in the
fast-growing compact class since March. The new X4 is athletic from
top to bottom. It will be available in summer.
Our model offensive is also a drive train offensive. We are using
scalable modular kits for electrification. From 2020, we will be able
to fit all model series with any type of drive train. And there is
more to come: In 2020, BMW will launch the iX3. More on that soon at
the auto show in Beijing. 2019 will see the first pure electric MINI.
The first MINI plug-in hybrid – the Countryman – is already proving
very popular. As an urban brand, MINI is practically made for e-mobility.
The new BMW i8 Roadster and BMW i8 Coupé will be available starting
in May of this year. Both models come with fourth-generation BMW
eDrive technology. This will boost the electric range of these plug-in
hybrids by more than 40 percent. With the fifth generation of eDrive,
our vehicles will be able to drive 550 to 700 kilometres on electric
power, depending on the model. We will achieve this in the BMW i4 and
The BMW iNEXT is far more than just a car. By that, we mean it is a
future-proof, scalable modular system. It will enable the entire
company and all our brands in terms of technology, design and new
approaches. The iNEXT combines Autonomous Driving, Connectivity,
Electrification and Services.
I have set clear goals for sustainable mobility: More than 140,000
electrified vehicles sold this year. A total of half a million
electric vehicles and plug-in hybrids on the roads by the end of 2019.
25 electrified models, 12 of them pure electric, by 2025.
Now I would like to say a few words about diesel: Our diesels are
among the best in the world. That has been confirmed by independent
tests worldwide. Diesel is important for meeting CO2
targets. We believe banning diesel vehicles is the wrong approach. We
stand by our commitments from the Diesel Summit. We have promised our
leasing customers in Germany that we will take back our BMW diesels if
bans are introduced. Through this, we want to strengthen people’s
trust in our diesels. It would also be helpful if the discussion about
nitrogen oxides and particulate matter were based more on reality and facts.
Sustainable mobility and autonomous driving go hand in hand for us.
We will be launching autonomous driving in the iNEXT in 2021. That
means: We will technically master Levels 3 to 5. The system will be
fully integrated and safe. Our test fleet for Levels 4 and 5 will take
to the roads at the same time as the iNEXT. When it comes to
autonomous driving, safety is our absolute priority. This year, we
will double the size of our autonomous test fleet, to around 80 vehicles.
And now, to my third point: Mobility services.
At the start of the year, we took full ownership of DriveNow. We also
acquired Parkmobile LLC – making the BMW Group the largest
international provider of digital parking solutions. We now have all
the options we need for continued strategic development of our
mobility services. We want to be customers’ first stop for individual
mobility. We will build a customer base of 100 million active
customers by 2025. Our goal is to create a complete, all-inclusive
ecosystem for customers. The potential is huge – both for customers
and for our business success.
Despite the challenges and headwinds: We remain optimistic,
determined and fully focussed. We intend to make 2018 our ninth record
year. And as you know: We always deliver on our promises. In all areas
of our business, we are pushing forward at top-speed. Our future is
electric and connected. And the customer will always be at the heart
of everything we do.
Consumption and Emission Data.
BMW i8 Roadster:
Fuel consumption in l/100 km (combined): 2.1
emissions in g/km (combined): 46
Electric power consumption in
kWh/100 km (combined): 14.5
BMW i8 Coupé:
Fuel consumption in l/100 km (combined):
CO2 emissions in g/km (combined): 42
Electric power consumption in kWh/100 km (combined): 14.0
Fuel consumption in l/100 km (combined): 6.5-4.6
CO2 emissions in g/km (combined): 149–120
Fuel consumption in l/100 km (combined): 6.2-4.5
CO2 emissions in g/km (combined): 142–119
Fuel consumption in l/100 km (combined): 8.4-5.3
CO2 emissions in g/km (combined): 193–140
Fuel consumption in l/100 km (combined): 7.3-5.4
CO2 emissions in g/km (combined): 173–142
BMW 530 Le iPerformance is produced specifically for the Chinese market.
MINI Cooper S E Countryman ALL4:
Fuel consumption in l/100 km (combined): 2.3-2.1
CO2 emissions in g/km (combined): 52-49
power consumption in kWh/100 km (combined): 14.0-13.2
Fuel consumption in l/100 km (combined): 13.9
CO2-Emission in g/km (combined): 318-319
The fuel consumption, CO2 emissions, power consumption
and operating range figures were determined according to the
European Regulation (EC) 715/2007 in the version applicable. The
figures refer to a vehicle with basic configuration in Germany and
the range shown considers the different sizes of the selected
wheels/tyres and the selected items of optional equipment.
Further information on official fuel consumption figures and
specific CO2 emission values of new passenger cars is
included in the following guideline: ‘Leitfaden über den
Kraftstoffverbrauch, die CO2-Emissionen und den
Stromverbrauch neuer Personenkraftwagen’ (Guideline for fuel
consumption, CO2 emissions and electric power consumption
of new passenger cars), which can be obtained free of charge from
all dealerships and at https://www.dat.de/en/offers/publications/guideline-for-fuel-consumption.html.