As a member of the audience at this year's BMW Group analyst conference ($BMW (-1,21 %) ), I was able to gain some interesting insights that I would like to share with you.
I am only summarizing the analysts' Q&A session here, as I found it very informative.
Patrick Hummel from UBS opened with two questions. The first was about the capital allocation. He praised the increase in the payout ratio for 2024, but asked for more specific details on the planned share buyback program beyond the EUR 1 billion per year already approved and why no further increase in the payout ratio was decided.
Mr. Mertl explained that the dividend policy is in the corridor of 30% to 40% of profit and that the current payout ratio is the highest ever used, supplemented by optional share buybacks. With regard to share buybacks, he assured that a new program would only be launched following approval by the Annual General Meeting and that details of the volume would be announced in good time. On the free cash flowwhich is forecast to exceed EUR 5 billion in 2025, he explained that this represents the limit for distributions and that the dividend for 2025 will be announced next year.
Mr. Hummel's second question concerned the announced announced departure of Frank Weberthe Chief Development Officer, shortly before the launch of the NEUE KLASSE. Mr. Zipse emphasized that this step had been planned for the long term and that the timing was perfect, as the main development of the NEUE KLASSE had been completed and the focus was now on the market launch. He was very confident about the cooperation with the new Chief Development Officer Joachim Post and Nicolai Martin.
Next up was José Asumendi from JPMorgan asked three questions. The first was addressed to Mr. Goller on the the change in the competitive environment in China and the planned product innovations for 2025. Mr. Goller referred to the global strength of the BMW Group, which can compensate for regional volatilities. He confirmed that the increasing market share of Chinese manufacturers in the domestic market was expected. Nevertheless, the Chinese market remains enormous with around 25 million units per year. BMW is responding to this with a restructuring of the dealer network and a model offensive with ten new models in China this year and a further 20 in 2026 and 2027. He expressed confidence in stabilizing business in China and achieving growth again with the new models. As an example, he cited the promising start of orders for the new China X3 with a long wheelbase.
Mr. Asumendi's second question to Mr. Mertl concerned the margin guidance for 2025 and the expectations for the Chinese market in view of the decline in sales and the brake recall in 2024. Mr. Mertl explained that the forecast assumes a stable stable development in China in the first and second quarters, comparable to the fourth quarter of 2024. The adjustment of the guidance in September 2024 was due to the IBS issue and unexpected market dynamics.
The third question to Mr. Zipse focused on the IBS recall and the lessons learned with regard to quality control and supplier relationships. Mr. Zipse emphasized that despite the problem, there were no safety-related impairments for customer vehicles. The rapid response to the problem and the increased transparency in the supplier landscape were strengths of BMW. He assured that quality continues to have top priority.
Tim Rokossa from Deutsche Bank also had two questions. The first was again about the margin guidance. He noted that BMW had said little about cost-cutting measures compared to competitors and asked about the impact of potential new tariffs and the situation in China on margins. Mr. Mertl referred to the forecast shown, where the tariffs already factored in were listed in detail, which would reduce the EBIT margin by around 1%. Without these tariffs, the guidance would be 6% to 8%. He emphasized that BMW is continuously working on cost efficiency efficiency in all areas and that 2024 will be the peak year for R&D, CapEx and operating costs. had been. He promised a turnaround in operating costs in the coming quarters. On the margin development over the course of the year no quarterly guidance was given, but Mr. Mertl indicated that the start could possibly be somewhat more restrained, as the annual guidance was lower than in the previous year.
Mr. Rokossa's second question to Mr. Zipse concerned the future of BMW's future in an increasingly fragmented worldespecially with regard to the current strength of local production. Mr. Zipse emphasized the resilience of BMW through technological openness, its global presence with local production facilities (local-for-local approach) and its innovation leadership, particularly through the "NEW CLASS". He pointed out that, for example, 50% of the US sales volume is produced locally and is therefore not affected by customs duties. The "NEW CLASS" will set a new standard in terms of reach, user experience and digital performance.
Stephen Reitman from Bernstein asked questions about the speed of introduction of the "NEUE KLASSE"the production ramp-up in Debrecen and Munich and the development of R&D costs (capitalization vs. amortization).
Mr. Goller explained that the market launch of the "NEUE KLASSE" will be rapid, as it is a complete family of vehicles. Production and the first launch of the iX3 will start at the end of the year, and six "NEW CLASS" models will be available worldwide within just two years, starting in Europe and then in the USA and China. Mr. Zipse added that the "NEW CLASS" would form the basis for 40 new or revised models by 2027 and the technology clusters would be used in many other vehicles within two years. Mr. Mertl explained that both the R&D and investment expenditure in 2025 compared to 2024 significantly and the capitalization ratio will remain essentially the same, which will have a positive impact on free cash flow.
Mr. Reitman's second question concerned communication with political decision-makers in the USA regarding the impact of tariffs on business and employment, particularly with regard to the plant in Spartanburg, South Carolina. Mr. Zipse referred to the investments already made and planned in the U.S. totaling $16 billion, which would make BMW a local player and reduce its vulnerability to tariffs.
Horst Schneider from Bank of America focused his questions on the pricing of the NEUE KLASSE and the general price expectations for 2025 and the passing on of customs duties to customers. Mr. Mertl emphasized that pricing is different in the various markets and depends on the respective market potential. With regard to the average revenue per unit for 2025, BMW expects a level that corresponds to that of 2024. Regarding the passing on of US tariffs, Mr. Goller explained that there had been price protection for customers for vehicles already ordered. The long-term strategy would depend on the further development of the tariff situation.
Michael Punzet from DZ Bank asked for a clarification on an alleged provision of 1 billion euros for customs duties and the possibilities, to offset US import duties with exports from the USA. Mr. Mertl clarified that no provision for customs duties had had been made. The EUR 1 billion mentioned was merely a classification of the potential impact of the aforementioned tariffs. With regard to compensation, he explained that exports from Spartanburg to other regions of the world were not affected by US import duties according to current knowledge. For imports to the USA, BMW is examining various options such as adjusting supply chains and the product mix as well as a possible increase in production in Spartanburg.
In conclusion Daniel Schwarz from Stifel asked questions about cash allocation. He pointed out that although the highest payout ratio was a signal, the absolute dividend had fallen year-on-year. He asked whether BMW would focus less on the payout ratio in future and more on the absolute dividend, even if this could occasionally exceed 40%.
Mr. Mertl emphasized that the principles of cash allocation (dividend in the corridor and optional share buybacks) had not changed. However, he pointed out that this year's payout ratio was the highest and that, including share buybacks, the distributions for 2024 would be close to 100% of the free cash flow and that the 40% mark would also be exceeded for 2023. On the second question about the guarantee provisions in the fourth quarter Mr. Mertl explained that there had been an extraordinary increase in provisions in the fourth quarter of 2023, which had not occurred in this form in the fourth quarter of 2024, which had led to the impression of lower provisions.
The capital allocation and the margin development remained key topics for the analysts. BMW emphasized its strategic flexibility, global orientation with local production sites and continuous efforts to improve cost efficiency and quality. The effects of customs duties were discussed transparently and taken into account in the guidance. Overall, the conference gave the impression that BMW is optimistic about the future and wants to further strengthen its position in global competition.
I hope you found this summary of the analyst conference interesting!
