BMW's profits fell sharply: Group profits fell 84% in the third quarter. German rivals face a similar situation.Image: trapezoid
German carmakers face huge challenges. Now BMW is reporting a sharp decline, too. An insider explains the mistakes company leaders made and the only solutions.
Markus Abrahamczyk/t-online
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German carmakers' profits are falling sharply. BMW, in particular, saw its automotive business hit a new low in the third quarter, with profit margins of just 2.3%, again well below Mercedes' levels. The Stuttgart-based company has forecast return on sales to fall to 7.5% to 8.5% in September. What's the reason? Where is the solution?
China's losses are a red flag
Professor Ferdinand Dudenhofer, a German industry expert, described the situation with fierce words: “The profits of German automakers melt like snow under the sun.” BMW's 30% sales drop in China is particularly serious. Mercedes and Volkswagen face similar problems. Dudenhoff said they all had one big problem: Their cars were too unattractive in China.
BMW sales are collapsing
BMW's third-quarter profit fell nearly 84% to 476 million euros. Sales fell 16% to 32.4 billion euros due to technical problems with the braking system and weak demand in China.
In contrast, companies such as Tesla and Chinese brands such as BYD, Geely and NIO are rapidly gaining market share with new technologies. Dudenhofer: “While Tesla and Chinese automakers are increasingly sophisticating with new technologies, German automakers are collapsing at almost record speed.”
Outdated production processes become an obstacle
A core problem is the German manufacturer's outdated production processes. Technologies like “gigabit casting” that reduce production costs are rarely used by them, and Chinese companies are driving such innovations. With the support of technology giants such as Huawei and Tencent, Chinese companies are also clearly leading in the field of “software-defined cars”.
- Super casting: With this manufacturing technique, large parts of a car can be made from a single casting instead of many separate parts. It's faster and cheaper. Critics warn, however, that this approach could be more expensive for owners if damage occurs: for example, if the entire rear consists of just a single component, no single component can be replaced after a rear-end collision. Instead, the entire rear had to be replaced and repainted—an endeavor that quickly resulted in a total financial loss.
- Software-defined car: A car controlled primarily by software rather than traditional hardware. Navigation and other assistants can be improved through software updates.
There are also infrastructure weaknesses, such as insufficient digital infrastructure. Industry experts criticized this as leading to higher costs and slower development compared with China.
Need to reverse quickly
Dudenhofer called for a rapid change of course: “German car manufacturers must react, otherwise the situation will not get better.” The most important thing is that we must learn from Tesla and learn from China's development. “To do that, you have to go to China for vehicle development.”
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