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2021 Will Be A Year Of Profits Again, Says BMW As It Overturns Pandemic Hit

2021 Will Be A Year Of Profits Again, Says BMW As It Overturns Pandemic Hit
The German luxury car maker BMW has managed to stage recover from the shutdowns and a significant hit to its sales last year because of the Covid-19 pandemic during the first half of last year and is now on track to regain profitability for 2021, the car maker said on Thursday.
The company will make available to its customers five fully-electric models this year itself, said the premium German car maker, as a part of its strategy to keep pace with the rest of the industry to launch new zero-emission models in order to meet stricter CO2 emission targets in Europe and China.
Many car makers had expected 2020 to be a disastrous year as they were forced to shut down factories and production units to slow down and prevent the fast spreading of the pandemic during the first half of 2020. However the wider industry was able to recover faster than expected because of surge in demand for cars in China.  
“Our performance in the second half of the year demonstrated just how strong the BMW Group is … we soon overcame the impact of weeks of plant closures and nationwide lockdowns,” Chief Executive Oliver Zipse said. “We are starting 2021 revitalised and with a favourable tailwind.”
There was a 7.4 per cent year on year growth of sales of BMW in China which helped the company to mostly offset drop in sales in other parts of the world last year.
BMW’s rival Daimler AG was also able to report a full-year pre-tax profit because of increased demand from China. There was also a less than expected drop in the profits for 2020 for Volkswagen AG which was driven primarily by its China sales as customers in the market showed eagerness to lap up the company’s premium Audi vehicles.
The company remained profitable throughout 2020 barring the second quarter, BMW said.
For the company, its expenditure for research and development costs remained high at 5.7 billion euros ($6.8 billion) because of the needs for the investments in electrification, self-driving technology and connectivity. However the investments of the company in R&D still remained more than 4 per cent lower than the expenses of the company in 2019 which was at almost 6 billion euros.
During 2020, BMW trimmed down its other capital expenditures by more than 30 per cent.
The company reported an almost 27 per cent drop in its full-year 2020 pre-tax profit which came in at 5.2 billion euros ($6.22 billion) compared to 7.2 billion euros in the previous year, said the premium carmaker.
Despite the widespread lockdowns and shutdowns in 2020, at the end of the year, the company had free cash flow of 3.4 billion euros which was higher than the 2.6 billion euros the company had reported in 2019.
The carmaker’s pre-tax margin for the automotive segment fell to 5.3% from 6.8%.

Christopher J. Mitchell

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