BMW will increase research and development or R&D spending to an all-time high of up to 7 billion euros ($8.6 billion) this year as it bolsters its effort to bring 25 electrified models to market by 2025.
The Munich-based automaker said that despite higher spending, it expects group pre-tax profit to be over 10 billion euros in 2018, at least in line with last year’s level.
According to its annual report, BMW also warned of a possible effect from trade barriers and any anti-dumping customs duties in the United States. It also added that Brexit could have an adverse long-term effect.
Spending on developing electric and autonomous cars pushed R&D costs a billion euros higher last year, reaching 6.1 billion euros.
“Investment will rise by a further high three-digit million euro amount year-on-year, primarily from the ongoing new model initiative as well as continued work on e-mobility and autonomous driving,” BMW said in a statement on Wednesday.
BMW’s R&D ratio for 2018 is expected to be between 6.5 percent and 7 percent of sales. BMW also said it expects its R&D ratio to stay above its usual target corridor of 5 percent to 5.5 percent range in the next two years.
This March, BMW reported a 5.3 percent rise in 2017 operating profit on surging demand for high-margin sports utility vehicles, helping to balance higher research spending.
Sales of luxury cars are expected to keep rising, adding to new record unit sales this year, it said.
“In the automotive segment we expect to achieve new all-time highs in 2018. As long as conditions remain stable, we should see a light increase in deliveries from growth in China and the U.S. in particular,” BMW Chief Financial Officer Nicolas Peter said in a statement.
BMW did add a note of caution over trade tensions and Britain’s looming exit from the European Union.
“A possible introduction of trade barriers, including anti-dumping customs duties, by the U.S. administration, could have an adverse impact on the BMW Group’s operations,” BMW said in its annual report.
Separately, prosecutors in Munich looked into BMW’s headquarters on Tuesday as part of their ongoing investigation into an emissions-cheating scandal that has badly damaged other German carmakers.
BMW had until recently been relatively unharmed by the matter, which has cost Volkswagen billions of dollars, prompted investigations of the luxury carmaker Daimler and depressed sales of profitable diesel models across Europe.
The raids on Tuesday suggested that all of Germany’s top domestic automakers may have evaded emissions rules, although perhaps not to the same degree as Volkswagen.
If so, the risk to Germany’s car industry, and to the nation’s broader economy, would increase sharply. Motor vehicles are the country’s largest export product, and BMW, Daimler’s Mercedes-Benz division, and Volkswagen’s Audi and Porsche units dominate the global market for luxury cars, where brand image is a crucial component.
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