BERLIN (March 14): BMW expects trade tariffs to cost the carmaker €1 billion (US$1.09 billion or RM4.8 billion) this year, its CEO said on Friday, factoring in EU duties on its China-made EV and newly imposed US tariffs which are upending global trade.

The premium carmaker expects its earnings margin for cars to be 5-7% in 2025, below an LSEG consensus estimate of 7.3%, dragged down one percentage point by the impact of tariffs already imposed by March 12.

Chief executive Oliver Zipse said the €1 billion provision in the group's earnings was "conservative", with possible further tariffs to come from the European Union and United States.

Still, executives did not expect all the tariffs in place so far, which include 25% tariffs on steel and aluminium and on BMW's vehicle imports to the US from Mexico, to remain in place for the whole year, Zipse said.

"If the situation changes, so does our outlook," CFO Walter Mertl added.

BMW's shares were down 2.3% at 0803 GMT, with investors disappointed at the lower-than-expected margin for the group's autos segment.

The German carmaker is directly in the firing line of an escalating trade war between the US and the EU, with US President Donald Trump threatening heightened tariffs on Europe's car imports from April 2 and Europe vowing retaliation while also calling for dialogue.

Some 56% of vehicles BMW makes in Germany are exported outside the European Union, and its US plant in South Carolina exports cars worth over US$10 billion, making the company the largest US automotive exporter by value, according to CEO Zipse.

BMW's net profit slumped by over a third in 2024 to €7.68 billion, in line with market expectations, after weak sales in China and Germany as well as delivery hold-ups, because of problems with a brake, dented performance.

Fourth quarter profit dropped 41%, in line with warnings from the carmaker in January that higher fixed costs from unwinding inventory would hit its earnings in the last three months of 2024.

The group proposed an increased payout ratio of 36.7%, among the highest in its history, consisting of a dividend of €4.32 per preferred share for 2024, still down from 6.02 euros paid out for the previous year.

BMW cut its 2024 margin outlook to 6-7% from 8-10% in September because of slumping China sales and problems with a brake supplied by Continental, affecting 1.5 million cars.

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