Slowing Premium Car Sales Dents BMW China Venture Profits

Updated on
NY AUTO SHOW
Photographer: Michael Nagle/Bloomberg

BMW AG’s China joint venture partner said it expects first-half net income to fall about 40 percent as demand for premium cars slows in the world’s largest auto market.

Brilliance China Automotive Holdings Ltd. dropped 9.4 percent to HK$10.28 in Hong Kong trading Tuesday, after warning about higher expenses in a statement to the stock exchange. The benchmark Hang Seng Index slid 0.4 percent.

The profit warning is the latest sign that demand in China for luxury cars is declining amid a moderation in economic growth and volatility in the stock market. BMW had extended financial assistance and cut production to lower excess inventory, after its dealers complained of mounting losses.

“According to our dealer checks, recent volatility in the A-share market has led to some cancellation of passenger vehicle orders with the premium segment more affected than mass market brands,” Yang Song, a Hong Kong-based analyst at Barclays Plc, wrote in a report. Declining prices, higher dealer subsidies and costs of introducing new models also added to costs in the first half, Song said.

BMW said it remains confident in the Chinese market despite the projected decline in profit at its joint venture partner.

“The mid- and long-term conditions and prospects for the Chinese car market continue to be attractive,” BMW said in an e-mailed statement. “These include the low rate of car ownership, an expanding middle-class, our strong market position and the continuing growth of the premium segment.”

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— With assistance by Alexandra Ho

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