German car manufacturer BMW is planning the largest investments in the company's history this year and is therefore expecting a slight decline in pre-tax profits, company executives said on Thursday.
Planned investments include the construction of battery factories in southern Germany, China, Mexico and the United States, as well as the construction of a new vehicle plant in Hungary and the launch of its New Class platform of all-electric vehicles, said Walter Mertl, the company's chief financial officer.
BMW is also investing in expanding its Munich plant and the electrification of a factory for British subsidiary Mini in Oxford, Mertl said.
Large investments in BMW's New Class platform are aimed at bringing electric vehicles up to the level of a combustion engine in terms of costs and profitability, Mertl said.
Mertl, speaking at the company's annual press conference, said investments and research and development costs for BMW are rising "to a new level."
Investments are expected to total more than 6% of turnover, while research and development spending will account for more than 5%, Mertl said.
Last year, BMW sold 2.55 million vehicles worldwide, generated €155.5 billion ($169.5 billion) in sales and €17.1 billion in profit before taxes, according to the company.
This year, car sales are expected to increase slightly, with all-electric and luxury cars as growth drivers, executives for the carmaker said.
As a result, turnover will also grow, said Mertl. He said that BMW is targeting a profit margin in its core business of between 8% and 10% of sales, in line with the 9.8% profit margin last year.
A further decline in the value of used cars is also likely to drag down profits for BMW as well, Mertl said, as the financial results from BMW's leasing division would fall.
At the annual press conference, BMW presented its first SUV vehicle based on the new class platform. The car is due to roll off the production line at the new Hungarian plant in Debrecen next year.
Oliver Zipse, the chairman of BMW's management board, called the new class platform "the redefinition of the BMW brand."
The new class of electric vehicle will deliver 30% more range and 30% faster charging speed compared to a current electric BMW, while costing BMW about 40% less to build the drivetrain, said Frank Weber, a BMW executive who oversees development.
Weber said that the range of electric vehicles and charging speeds remain the biggest hurdles for convincing potential car buyers. Some electric vehicle customers have returned to buy plug-in hybrids instead.
Better charging infrastructure, renewable electricity to manufacture and operate electric cars and improvements in recycling battery raw materials are necessary for a successful transition, Weber said.
Costs of raw materials for batteries such as lithium have been volatile and remain the key variable in the price of producing battery powered vehicles.
In terms of sales, BMW expects electric and luxury cars to drive growth for the company and record double-digit sales improvements.
BMW and its subsidiaries have 15 all-electric models on offer and aims to sell more than half a million all-electric cars this year.
Last year, BMW beat European Union CO2 emissions targets for its vehicle fleet with 102.1 grams of CO2 per kilometre travelled, more than 20% better than the EU benchmark of 128.5 grams of CO2 per kilometre.
Worldwide, BMW has a market share of 3.3%, but the Munich-based company already has 4.1% of all-electric cars.
