Statement by Harald Krüger, Chairman of the Board of Management of BMW AG, Conference Call Interim Report to 30th June 2018

Good morning, Ladies and Gentlemen!

 

At the BMW Group, we have clear targets – and we always deliver on
our promises.

 

Our sights remain fixed on the long term. We are already anticipating
what mobility will look like in 10, 15 years down the road – and
taking the necessary decisions today. Our Strategy NUMBER ONE
NEXT gives us a clear direction and maps out our long-term goals.

 

Volatility and uncertainty have both been part of our daily business
for a long time now. However, our strategy enables us to adjust to
short-term changes in our business environment. This flexible
framework has been key to the BMW Group’s success so far.

 

We respond to new demands early and set the trends. Let me give you a
few examples:

 

1. The shift towards sustainable mobility with Efficient Dynamics
since 2007.

 

2. Our pioneering role in e-mobility. In the first half of 2018, the
i3 was once again the top-selling electric vehicle in the premium
compact segment. We currently offer customers ten electric or plug-in
hybrid models. Since the start of this year, we have delivered more
than 60,600 electrified vehicles to customers – an increase of over 40
percent year-on-year. We are therefore on track to meet our declared
goal of at least 140,000 vehicles this year.

Other fully electric models are also ready to go: We will release the
MINI Electric late next year; followed in 2020, by the first
fully-electric BMW – the iX3.

 

3. Expanding our mobility services into a strong business segment
that will complement our core business. The planned joint venture with
the Daimler Group is the next logical step. Together, we will take
innovative mobility services to a whole new level.

 

4. Our focus on achieving the most balanced distribution of sales
possible, with local production in the main economic regions of
Europe, the Americas and Asia. This gives us greater flexibility in
the current trade disputes. Our global production network opens up
various possibilities for us. The new BMW X3 is now also being built
in Shenyang and Rosslyn, as well as at our Spartanburg plant.

 

5. Switching BMW models to the new WLTP test procedure. With the
exception of just a few model variants, we have already switched
several hundred models, well ahead of the September deadline. Since we
integrated the WLTP switch into our production and sales planning
early, we are able to offer our fleet customers the same wide range of
products as usual. Delivery times for our models are the usual three
months. We also have around 190 models that already meet the Euro
6d-TEMP emissions standard.

 

Our forward planning underscores how we put the interests of our
customers first. It also makes it quite clear that: We face challenges
head on – regardless of where they come from. With our strategy, we
are pursuing a clear vision: to be NUMBER ONE. And we are steering the
BMW Group according to several performance indicators, crucial for our
success. Three aspects are especially important to us:

 

Profitability, growth and future competitiveness.

 

In 2017, we were the world’s most profitable car company. That is why
we are able to continue investing in our future. We have the same aim
for the current business year. In the first half of 2018, Group
earnings before tax exceeded six billion euros. The EBIT margin in the
Automotive Segment remains within our target range of 8 to 10 percent.
The Group EBT margin stands at 12.7 percent and is therefore above our
target of 10 percent.

 

Growth is very important in the highly competitive premium segment.

We are targeting profitable growth and leadership in all segments
where we do business. Between January and June 2018, with our three
brands BMW, MINI and Rolls-Royce, we delivered more vehicles to
customers than ever before in the first six months of a year.

 

We are securing our future competitiveness by strengthening our
brands and creating innovations – especially for autonomous driving
and e-mobility. The work at our autonomous driving campus outside
Munich is in full swing. In May, we became the first international
carmaker to receive a licence from the City of Shanghai to test
autonomous driving. Early next year, we will open our new “Battery
Cell Competence Centre” in Munich. This is where we will focus all our
technological expertise in the development and production of battery
cells which are the heart of the battery.

 

In a highly volatile environment, we are constantly finding the right
balance between all three proof points – profitability, growth and
future competitiveness.

 

Over the past few months, the business environment in which we
operate has become even more challenging. Despite this, our operating
business remains strong. Because our strategy enables us to maintain
our course – even through difficult conditions.

 

For 2018, our goals remain unchanged:

 

  • A slight increase in automotive deliveries to a new all-time sales high.
  • Group earnings before tax at the same high level as the previous year.
  • An EBIT margin in the Automotive Segment of between eight and ten percent.

 

Of course, these goals assume that economic and political conditions
will not worsen any further.

 

As you know, the BMW Group remains committed to free trade and open
markets. Our global presence enables us to remain agile and flexible.
More than ever, we are looking at different scenarios and are taking
advantage of opportunities in the major regions.

 

China is our most important single market and leads the way in
e-mobility und connectivity. In recent weeks, we’ve laid the path for
important strategic steps.

We will be expanding and strengthening our business in China over the
long term:

 

  1. We are expanding our joint venture with BBA. We will increase our
    capacity to 520,000 vehicles. Moreover, the first fully-electric
    X3 will be exported from China to other markets. We are the first
    international car company to receive an agreement from the Chinese
    government allowing us to increase our stake in a joint venture
    from 2022.

     

  2. We have agreed to a 50:50 joint venture with Chinese manufacturer
    Great Wall Motor and plan to build electric MINIs together. The
    joint venture will also produce electric models for Great Wall
    Motor. This is a logical step into the electric future for MINI.

 

  1. We have signed a memorandum of understanding with Baidu. The BMW
    Group will gain a seat on the board of Apollo – which is Baidu’s
    open platform for automated driving.

 

  1. We have awarded CATL a contract worth a total of four billion
    euros. CATL will build the largest battery-cell plant in Germany,
    which will supply battery cells for our BMW iNEXT from 2021. This
    means the entire value chain for production of electrified vehicles
    will be located here in Germany. This will be essential for
    expanding our leading position in e-mobility. We will also be
    purchasing raw materials for battery cells ourselves, especially
    cobalt, in the future.

 

As you can see: We have enhanced our presence in China in a single
stroke. At the same time, we are implementing our strategy in other
market regions.

 

Our largest plant is located in the United States. We remain
committed to our investment and expansion plans there. Going forward,
we will build up to 450,000 vehicles a year in Spartanburg and we will
remain a net exporter. That means: We will continue to produce more
vehicles in Spartanburg than we sell in the US. The new X7 will also
contribute to our growth strategy.

 

In all three major sales regions – Europe, America, Asia – we
reported growth in the first half of the year.

 

Europe remains our largest sales region. That is why we decided to
build a new BMW plant in Hungary. After significant investments in
China, Mexico and the USA, we are now focussing on our activities in
Europe. This ensures our worldwide balance of production between Asia,
America and our home continent. The new plant will set new standards
in digitalization, sustainability and flexibility and will also lead
the way in new technologies.

 

The foundation of our worldwide success is our strong model offensive.

 

I’m certain that the new Z4 will be turning heads in 2019.
Journalists were just testing prototypes.

 

Beginning with the X2, 2018 is our year of the X. We will offer three
additional models:

  • The new X4 has been on the market since July.
  • The new X5 will be released in November.
  • Production of the all-new X7 will get underway towards the end of
    the year.

 

This shows our clear commitment to fulfil our customers’ increasing
demand for SAVs.

 

Ladies and Gentlemen, We have another ace up our sleeve: A systematic
expansion of our luxury segment.

  • The new i8 Roadster is fresh on the market.
  • Within the new 8 series model range, production of the new BMW 8
    Series Coupé is already underway. The market launch is scheduled for
    November. This will be followed in 2019 by the Convertible and Gran
    Coupé, as well as the corresponding M models. All models showcase
    our new design language.
  • Rolls-Royce will also be releasing the Cullinan. The media
    resonance and numerous pre-orders show that the Cullinan perfectly
    reflects the pinnacle of luxury in the new off-road segment.

 

In the second half of the year, there is even more to come: our new
iNEXT vision vehicle – revealing new horizons.

As you can see: We are driving full speed ahead – in the major
regions of the world, with innovative technologies and with new
products. We continue to follow our clear strategic roadmap and remain
highly flexible. Thank you!