Coronavirus: BMW braces for month-long production stop and 'significant' sales drop

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
The BMW logo on the headquarters of the automobile manufacturer in Munich, Germany, 20 March 2019. Photo: Tobias Hase/picture alliance via Getty Images

BMW (BMW.DE) has announced a production stop at its European plants until 19 April in response to the coronavirus pandemic, which is causing a breakdown in automotive supply chains and has killed off consumer demand.

Live-streaming its annual press conference from its headquarters in Bavaria on Wednesday, the premium German carmaker said was reacting early to the drop in demand in the global automotive markets by adjusting production and is likely to put staff onto reduced working hours.

Chief executive Oliver Zipse said that the number of employees globally — some 133,000— should remain stable in 2020.

The BMW Group, which includes Mini and Rolls-Royce, expects a “significant decrease” in 2020 global deliveries and pre-tax earnings.

It had been targeting an EBIT margin of between 6% and 8% before the coronavirus devastated sales in the Chinese market and became a pandemic, but said today that its EBIT margin for 2020 would now be somewhere between 2% and 4%.

READ MORE: European stocks fall as coronavirus stimulus packages fail to calm investors

In 2019, BMW saw a 2.2% rise in global deliveries to 2.5 million vehicles. It reported a 6.8% growth in group revenues to €91.6m but a 27% drop in earnings before interest and tax to €4.4 m. Despite the coronavirus crisis, BMW said it still plans to invest around €30bn in new mobility research and development by 2025.

Volkswagen, the world’s largest carmaker, announced this week that it would suspend production at its plants across Europe, including the Lamborghini and Ducati plants, and the big VW factory in its home city of Wolfsburg, Germany. 

READ MORE: Volkswagen reports 'very successful year' as coronavirus clouds 2020 outlook

Toyota, Ford, Daimler, Renault Fiat Chrysler, and the PSA Group, which includes Peugeot, Citroen, and Opel, are all halting production at most of their European manufacturing plants. Porsche on Wednesday also announced an initial two-week production halt at its plants in Zuffenhausen and Leipzig.

According to data released today by the European Automobile Manufacturers Association, the EU passenger car market had a dire start to 2020, declining by more than 7% in February, after a similar contraction in January, mostly due to global economic uncertainty affecting consumer demand.

Germany was the worst hit market last month, followed by France, Italy, and Spain.