BMW AG

BMW faces high cost pressure not only from increased raw material cost, but also from increased research and development (R&D) costs, new model launches, and compliance with tougher environmental regulations. Headwinds to margins also include competitive market conditions, higher cost for personnel, and IT systems. BMW's S&P Global Ratings-adjusted EBITDA margin was 13.9% for the 12 months to Sept. 30, 2018, down slightly from the 14.6% for the same period in 2017. We expect margins will decline in 2018 to about 12% before improving to about 12%-13% from 2019. The stable outlook reflects our view that BMW is likely to maintain a very strong balance sheet over 2018-2019. This is supported by our expectation of continued positive FOCF in the

...BMW's strong margins should come under pressure in 2018, improving only slightly from 2019.Increasing headwinds in the form of pricing competition, foreign exchange volatility, trade tariffs, weaker demand in China, and environmental costs will weigh on BMW's strong margins in 2018-2019. In Europe, the hurdles generated by the transition to the Worldwide Harmonized Light Vehicle Test Procedure (WLTP) added pressure on profitability for select original equipment manufacturers (OEMs), namely Volkswagen (VW), Daimler, and to a lesser extent BMW and Fiat Chrysler Automobiles (FCA). BMW faces high cost pressure not only from increased raw material cost, but also from increased research and development (R&D) costs, new model launches, and compliance with tougher environmental regulations. Headwinds to margins also include competitive market conditions, higher cost for personnel, and IT systems. BMW's S&P Global Ratings-adjusted EBITDA margin was 13.9% for the 12 months to Sept. 30, 2018, down...

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