The BMW Group remains firmly committed to following its forward-looking strategy, despite the current challenging conditions. In line with its Strategy NUMBER ONE > NEXT, the BMW Group continues to invest extensively in tomorrow's technologies and is maintaining its steady course, despite highly volatile geopolitical and trade policy developments.

Research and development expenses during the first nine months of 2018 exceeded last year’s corresponding figure by around € 400 million and totalled € 3,881 million (+11.4%). As previously reported, full-year R&D expenses are likely to amount to as much as seven per cent of Group revenues in 2018 (2017: 6.2%). This level of expenditure was reached in the third quarter, with an R&D ratio of 6.9%. At € 2,889 million, capital expenditure over the nine-month period from January to September was also up on the previous year (2017: € 2,817 million). In addition to ramping up the roll-out of new models, the focus is on expanding business in the fields of electric mobility and autonomous driving. As the world’s leading provider of premium mobility, the BMW Group puts the needs and desires of its customers first and is continuing its ground-breaking work on the four ACES topics (Autonomous, Connected, Electrified and Services/Shared).

In recent months in particular, the BMW Group has taken numerous key strategic decisions to underpin its future success on a sustainable basis. The BMW Group is bolstering its global production network, focusing keenly on Europe, China and the USA. In September, the four-millionth vehicle was produced at the Spartanburg plant in the USA, the Group’s largest manufacturing facility worldwide. The BMW Group is currently investing in its Spartanburg plant on a substantial scale, preparing the plant for future generations of BMW X models and enlarging the local workforce from a current figure of around 10,000 employees to 11,000 employees by 2021. In addition to the 1,400 BMW X3, X4, X5 and X6 vehicles currently produced daily in Spartanburg, from December onwards the new BMW X7 is set to become the fifth BMW model to be manufactured at the South Carolina plant.

A few weeks ago, the BMW Group also announced its intention to comprehensively expand its business in China. As the first foreign automobile manufacturer to take this step in China, the BMW Group has agreed with its local partner, Brilliance, to acquire a majority stake in the BMW Brilliance Automotive joint venture. At the same time, the contractual term of the joint venture is to be extended until 2040. Investments of more than three billion euros in local plant structures were announced in connection with this ground-breaking agreement. These measures strengthen the company’s position in China, a dynamic growth market.

 With the launch of the BMW i3, the BMW Group established itself early as a pioneer in the field of electric mobility. Electrification is one of the key pillars of the Group's Strategy NUMBER ONE > NEXT. By 2021, the BMW Group will have five all-electric models: the BMW i3, the MINI Electric, the BMW iX3, the BMW i4 and the BMW iNEXT. By 2025, that number is set to grow to at least twelve models. Including plug-in hybrids – whose electrically powered range will increase significantly in the coming year – the BMW Group’s electrified product portfolio will then comprise at least 25 models.

This wide range is possible thanks to highly flexible vehicle architectures and an equally flexible global production system. Going forward, the BMW Group will be capable of manufacturing models with all-electric (BEV), hybrid-electric (PHEV) and conventional (ICE) drivetrains on a single production line. Its ability to integrate e-mobility in the production network enables the BMW Group to respond even more flexibly to the increasing demand for electrified vehicles. The goal for the current year is to deliver 140,000 electrified vehicles to customers. By the end of 2019, the BMW Group expects to have more than half a million electrified vehicles on the roads.

The BMW Group is currently developing the fifth generation of its electric drivetrain, in which the interplay of electric motor, transmission, power electronics and battery will be additionally optimised. Integrating the electric motor, transmission and power electronics also cuts costs. Another advantage is that the electric motor does not require rare earths, enabling the BMW Group to reduce its dependence on their availability. The fifth generation of the electric drivetrain will be installed for the first time in the BMW iX3 in 2020.

At the beginning of the third quarter, the BMW Group signed a long-term contract with the Chinese company Contemporary Amperex Technology Co. Limited (CATL) to supply battery cells with a value of four billion euros. The award of this contract was a decisive factor in CATL’s decision to build the world's most advanced battery cell manufacturing facility in Germany. From 2021 onwards, cells for the BMW iNEXT – which will be manufactured at the BMW Group plant in Dingolfing – will be supplied by the new CATL plant in Erfurt. The BMW Group has thereby anchored the entire e-mobility value chain in Germany – from battery cell production through to the finished vehicle.

One of the prerequisites for expanding e-mobility volumes on this pioneering scale is the ability to efficiently manage the highly sought-after raw materials needed to manufacture the battery cells. In order to ensure security of supply, the BMW Group will in future purchase specific raw materials such as cobalt itself, and then make them available to battery cell suppliers – a strategy that has already proven its worth for aluminium and other resources. In addition, negotiations are being held with suppliers with the aim of concluding long-term agreements for battery raw materials that meet the BMW Group's sustainability criteria.

Furthermore the BMW Group is establishing a joint technology consortium together with Northvolt (a Swedish battery manufacturer) and Umicore (a Belgium-based company engaged in developing battery materials), thereby taking a further step to ensure access to the cell technology so vital for electric mobility. The collaboration will extend to the development of a complete, sustainable value chain for battery cells in Europe, including development, production and ultimately recycling. The recycling of battery components will play a key role: given the sharp rise in demand for battery cells, the consortium’s stated aim is to close the life-cycle loop of raw materials to the greatest possible extent with comprehensive recycling.

In terms of its core business, the BMW Group had always expected 2018 to be a challenging year. Compared with 2017, additional upfront expenditure of around one billion euros for the mobility of the future and a high three-digit million euro negative impact from exchange-rate and raw-materials-price developments had been factored into expected earnings for the year.

As announced on 25 September 2018, several additional factors further restricted business performance in the third quarter. Unlike many of its competitors, the BMW Group implemented the requirements of the WLTP regulations at an early stage. The industry-wide shift to the new WLTP test cycle has resulted in significant supply distortions in Europe and unexpectedly intense competition, given that numerous competitor models without WLTP certification were registered before 1 September. As a result, within the framework of its flexible production and sales strategy and given its focus on earnings quality, the BMW Group decided to reduce its volume planning. At the same time, increased goodwill and warranty measures resulted in significantly higher additions to provisions in the Automotive segment. In addition, the ongoing international trade conflicts had the effect of aggravating the market situation and feeding consumer uncertainty. These circumstances resulted in unexpectedly severe distortions in demand and therefore pressure on pricing in several markets.

Third-quarter revenues grew by 3.3% to € 21,111 million (2017: € 20,433 million). Due to the above adverse factors and the high level of upfront expenditure for research and development, EBIT for the three-month period fell to € 930 million (2017: € 1,758 million; -47.1%). The Automotive segment’s EBIT margin came in at 4.4% (2017: 8.6%). Profit before tax amounted to € 1,003 million (2017: € 1,886 million; -46.8%).

In total, 1,566,216 (2017: 1,537,497 units; +1.9%) BMW brand vehicles were delivered to customers worldwide during the first nine months of the year. With double-digit growth rates, the BMW 5 Series (+14.9%) and the new BMW X3 (+15.3%) were the main growth drivers. Deliveries of the BMW X3 rose by 62.5% in the third quarter, thanks to full availability and expanded production capacity.

A total of 265,935 (2017: 271,394; -2.0%) MINI brand vehicles were delivered to customers during the first nine months of 2018. The MINI Countryman recorded double-digit growth (+24.9%) during this period.

 Compared to the previous year, deliveries of Rolls-Royce Motor Cars rose by 13.5% (2,659 units) in the first three quarters of the year. Worldwide demand for all Rolls-Royce models, including the Black Badge variants of the Dawn, Ghost and Wraith, remains strong. Preparations are underway for the first deliveries of the Rolls-Royce Cullinan to customers, which are scheduled for early 2019. This new all-terrain model is already enjoying strong customer demand, with the order book filled well into the coming year.

 Whereas deliveries of the BMW Group’s three automotive brands in Europe remained virtually unchanged at the previous year's high level (816,037 units), the Americas (336,258 units; +3.0%) and Asia (638,449 units; +2.8%) regions recorded slight growth for the nine-month period. In China, the pace of growth in the number of deliveries to customers rose significantly in the third quarter (160,047 units; +11.5%), thanks to the ramp-up of the local production of the new BMW X3.

The BMW Group confirms its current outlook for the financial year 2018. Automotive segment revenues are expected to be slightly below the previous year's figure. The EBIT margin in the Automotive segment is expected to be at least 7%. Group profit before tax is expected to show a moderate decrease from the previous year. Possible positive earnings effects from a regulatory approval and the closing of the planned mobility services joint venture in 2018 are still not reflected in the adjusted outlook. The factors triggering the outlook revision on 25 September 2018 will also have a significant effect on Group profit before tax and the EBIT margin in the Automotive segment in the fourth quarter. The BMW Group continues to target slight increases in deliveries to customers in the Automotive segment in 2018.

Forecasts for the current year are based on the assumption that worldwide economic and political conditions will not change significantly. The BMW Group continues to benefit from its strong brands and attractive product portfolio, whilst at the same time having to deal with high levels of upfront expenditure for key new technologies, intense competition and rising personnel costs. The global political and economic environment is expected to remain volatile.