BMW to streamline car equipment levels to pay for R&D

MUNICH (Reuters) - BMW BMWG.DE will streamline its manufacturing process, offering fewer variants of engines and equipment, to offset high research and development (R&D) spending through 2019, the German carmaker's finance chief Nicolas Peter said on Wednesday.

FILE PHOTO: Flags near the headquarters of German luxury carmaker BMW before the company's annual shareholder meeting in Munich, Germany, May 11, 2017. REUTERS/Michael Dalder/File Photo

The group is developing electric, autonomous and connected cars in addition to vehicles with combustion engines to meet more stringent emissions tests.

At the same time, China’s aggressive push to introduce electric car quotas has forced European carmakers to accelerate the development and roll-out of electric and hybrid vehicles, pushing up their costs.

In 2016, BMW spent 5.16 billion euros or 5.5 percent of revenue on R&D.

“The next three years will be between 5.5 percent and 6 percent,” Peter told journalists.

Because electric and hybrid cars are less profitable than cars with petrol and diesel engines, BMW is looking for savings by reducing the complexity of its engine and equipment portfolio.

“We have over 100 steering wheels on offer. Do we need that many variants?” Peter said.

BMW will drop manual gearshift variants of the BMW 2 series Coupe in the United States to cut down the cost of certifying components in each market, and it has dropped manual shift options from entry-level versions of the new 5 series diesel, he said. It will also cut down the number of engine variants.

“In the 5 series we have four diesel engines on offer. I would not bet on there being four diesel engines on offer in the next generation vehicle,” Peter said.

BMW stuck with its guidance for a slight increase in both vehicle sales and pre-tax profit tax this year as well as a margin on earnings before interest and tax (EBIT) of between 8 and 10 percent.

Sales have received a boost from the launch of a new BMW 5 series limousine, which has exceeded expectations, Peter said, without providing details.

The carmaker has seen double-digit sales growth in China and remains on track to keep this momentum with the launch of a long-wheelbase 5 series and a BMW X1, Peter said.

BMW has also seen slight growth in Europe, although there are signs that demand in England is softening, he added.

“There are some signals that the market is getting more difficult,” Peter said, adding that order intake was slower and residual values were falling.

The U.S. market may remain stable or even shrink slightly, Peter said, adding that BMW was working on cutting back vehicle inventory.

He also said the group had not yet decided where to build the next electric version of the Mini, though a decision would come this year, with Oxford remaining a contender for the manufacturing site.

Reporting by Edward Taylor; Editing by Adrian Croft