Statement by Harald Krüger, Chairman of the Board of Management of BMW AG, Conference Call Interim Report to 31 March 2017

Good morning, ladies and gentlemen!

 

The BMW Group always takes a long-term approach. The business
environment remains volatile and marked by uncertainty. We continue to
chart our own course. To this end, we make strategic decisions and
enter into partnerships. This is how we will continue to secure the
future competitiveness of the BMW Group. As I said at the Annual
Accounts Press Conference: We are going on the offensive. This means:

 

  1. We have set ourselves ambitious goals for the current financial
    year. After the first quarter, we are on the right track. Our
    guidance for the full year 2017 remains stable.
  2. We inspire our customers. We are launching the biggest model
    offensive in our company’s history. This year alone, we will launch
    more than 20 new and revised car models; with another 20 to follow
    next year. There will also be 14 new BMW Motorrad models this year.
    Our customers will be able to choose between a wide range of
    different drive trains.
  3. We are setting a course for the future. That is what our Strategy
    NUMBER ONE NEXT is all about. We are leveraging the
    possibilities of digitalisation to take mobility to a new dimension
    for our customers. This applies to both our vehicles and services.
    Our production and internal processes are also becoming more
    digital. This will also significantly increase the speed of our
    actions. Our goal is clear: to be the technology and innovation
    leader in mobility.

 

I would like to say a few words about all three of these areas. Let’s
start with the first topic. You know our targets for the financial
year 2017:

 

  • A new all-time high for deliveries at Group level – and a new
    record for Group profit before tax.
  • We expect the EBIT margin in the Automotive Segment to remain
    within the range of 8 to 10 per cent.
  • And we have also set ourselves the goal of selling 100,000
    electrified vehicles.

 

After the first quarter, we are well on track.

 

  • Group sales posted a record first quarter.
  • Our BMW, MINI and BMW Motorrad brands also reported their
    best-ever first quarter.
  • The BMW brand delivered more than half a million vehicles in a
    single quarter for the first time.
  • The EBIT margin for the Automotive Segment reached 9.0 per cent.
  • Our pre-tax earnings increased significantly – to more than three
    billion euros. As previously reported, this is mainly due to
    valuation effects in the financial result. We are planning high
    upfront investments for the full year. This will include investment
    in our model offensive, our locations worldwide and in future
    technologies, such as electrification and autonomous driving. All
    these factors will affect our earnings momentum this year.
  • Electrification of our portfolio is a clear priority. We know from
    experience that customers prefer to have more choices. In the first
    quarter, we delivered twice as many BMW plug-in hybrids, BMW i3s and
    i8s than in the same period last year. Almost 20,000 customers opted
    for an alternative drive train. This means that electrified vehicles
    already account for more than three per cent of total BMW Group
    sales. When the new MINI Countryman Plug-in Hybrid arrives in
    summer, we will have a total of nine electrified models in showrooms.
  • Our electric BMW i3 was designed for urban mobility from the
    ground up. Unlike series-produced models with a combustion engine,
    the sales curve for the i3 is continuing its upward course. In the
    first quarter alone, sales figures were up 50% over the same period
    of last year. Of course, the extended range also contributed to this.

 

As I have said, electro-mobility is a marathon. New models will
provide us with further momentum.

 

  • In 2018, the BMW i8 Roadster.
  • In 2019, a pure electric MINI.
  • In 2020, a pure electric BMW X3.

 

Our efforts will continue to require extensive investment.

 

Let’s move on to the second aspect: We inspire customers.

 

The new BMW 5 Series sets the benchmark in connected services. It
also offers a wide range of drive trains and extras. Customers like
that. The 5 Series Sedan is in great demand. In the first months since
market launch, we have sold more than twice as many cars than we did
of its successful predecessor in the same timeframe. We are also very
pleased about the strong incoming orders for the plug-in hybrid model
and the M Performance variant, which have been on sale since March. In
June, the successor to the popular long wheelbase version in China
will become available, as well as the Touring. All these new models
will generate further impetus for growth. Sales of our flagship BMW 7
Series were 50% higher than in the first quarter of last year. As you
know, we want to increase our sales in the upper premium segment
significantly by 2020. To achieve this, we are selectively expanding
our range in the luxury class.

  • Towards the end of the year, Rolls-Royce will launch the eighth
    generation of the legendary Phantom. It will come with a new
    aluminium architecture.
  • For 2018, we have announced the BMW X7 – a model with a very
    strong emotional appeal.
  • Other new models will also strengthen our position in the
    high-margin luxury segment.

 

In addition to its new top model, the X7, the successful BMW X family
will also welcome attractive new additions in other segments:

  • the new BMW X3 later this year, and
  • a new BMW X2 next year.

 

Also, the entire BMW 4 Series range has been revised. All 4 Series
models, including the M4 Coupé and M4 Convertible, are even more
sporty, connected and upscale. At MINI, the new Countryman has had a
good start, just like the John Cooper Works model. The Plug-in Hybrid
will be available in June.

 

On to our third topic: We are setting the course for the future.

 

One of the BMW Group’s strengths is its high level of flexibility in
all areas.

 

  • Our balanced distribution of sales and our presence in the main
    market regions of the world help us offset regional fluctuations.
  • For production, we can rely on a highly-efficient global network
    of 31 locations in 14 countries. This allows us to adjust our model
    mix quickly in response to changes in demand.
  • When it comes to drive technologies, we prefer a broad and
    flexible approach. It is still too early for accurate predictions
    about which drive train will prevail in which marketplace, and when.
    That’s why it’s even more important for us to stay quick and ready
    to react.

Strategy NUMBER ONE NEXT will take Efficient Dynamics to the
next level: Efficient Dynamics 2.0.

 

  • We will continue to make our combustion engines even more efficient.
  • An important factor remains the aerodynamic optimisation of all
    our models.
  • By 2025, all our vehicles with combustion engines will be fitted
    with electric ELV recuperation systems. This will bring a further
    CO2 reduction of around 5 to 7 per cent.
  • We are working on fuel cells for longer distances with our
    partner, Toyota.

 

The modern diesel drive train is also a component of Efficient
Dynamics 2.0. There is much being said about diesel. However, we
prefer a more fact-based and rational discussion. I would now like to
say something based on the facts. One thing is certain: Diesel plays a
key role in Europe’s ambitious climate policy. Clean diesel vehicles
of the Euro 6 generation use at least 25 per cent less fuel than
comparable petrol models. Therefore they emit at least 15 per cent
less CO2. It will not be possible to meet the EU’s strict CO2 targets
for 2020 without diesel. We will continue to need clean diesel drive
trains in the future. That’s why we equip our new models with the most
modern technologies for exhaust gas treatment. As the number of Euro 6
vehicles in the market grows, diesels will account for less and less
of overall particulate matter and NOx emissions. Particulate matter is
anyway only an issue for diesel cars over 10 years old without a
particle filter. Particulate emissions from engines only account for a
very small percentage of the total volume. However, in public
discussions, “air quality alert” and “banning diesels vehicles” are
often mentioned in the same breath. Without the facts, the debate
about diesel creates uncertainty. Especially for the owners of older
diesel models. Additionally, car owners could be motivated by the
right incentives to switch to new technologies – like electro-mobility
– or to newer and more efficient combustion engines.

 

Big cities benefit most from an intelligent mix of solutions, for
example: improved traffic flow, support for e-mobility and charging
infrastructure, promotion of car-sharing with modern, low-emission
vehicles, less congestion and easier parking through digitalisation,
as well as environmentally-friendly buses and taxis.

 

As a global company, we need planning reliability for our investment
decisions. The same applies to customers and their purchasing
decisions. But: How is anyone supposed to make a decision when every
country has different regulations – and every big city has its own
concept for low-emission zones? Planning reliability comes from joint
solutions. Individual mobility – and diesel – need a coherent
framework – both at a national level here in Germany and across the
European Union.

 

With our strategy, we have a clear roadmap for the future. Let me
give you two current examples:

 

  1. Autonomous driving:

We are working intensively with Intel and Mobileye on the development
of autonomous vehicles. We are making good progress.

  1. Electro-mobility: We are strengthening this important future
    technology at our home base in Germany. We have the highest level of
    in-house development in electric engines, power electronics and
    battery, of any of our competitors.

 

We are now electrifying all our brands and model series. We are
creating flexible vehicle architectures for both conventional and
electrified drive trains. This enables us to meet the varying needs
and demand in the markets. Already today, nine locations worldwide
produce nine electrified models, eight of which are plug-in hybrids.
From 2021, the iNEXT will be our new innovation spearhead. We have
decided to build the iNEXT at our Dingolfing plant.

Together with our Landshut plant, we are expanding Dingolfing as our
second competence centre for e-mobility, alongside our Leipzig plant.
Dingolfing has much experience in lightweight construction, highly
complex model series and connected vehicles. The iNEXT – a larger BMW
i vehicle – fits into this spectrum.

 

Ladies and gentlemen,

 

All of this shows: We are implementing our strategy, step by step. We
anticipate trends in our business environment and react dynamically
and flexibly to unexpected changes. Our strong financial foundation
and our operational strength enable us to continue to shape our own future.

 

Thank you!