BMW claims that it "always expected 2018 to be a challenging year". Now it turns out even that may have been a little optimistic. The company has just revised its guidance for the 2018 financial year, now forecasting both revenues and margins to be down on 2017. That's a bit of a slide from the "slight year-on-year increase" BMW had been anticipating.
One of the reasons cited is the increased cost of meeting new emissions standards. Considering the company HQ was raided back in March over suspected cheating, it might not come as much of a surprise that BMW has had to push a little more money than anticipated into making sure its vehicle are definitely on the right side of the law.
More recently, the company has been embroiled in a growing scandal in South Korea, where a string of BMW fires have been reported over the last year. Another police raid followed, as the South Korean Transport Ministry demanded the company recall 106,000 cars for inspection. Things like that weight heavy on the coffers, which probably explains why "increased goodwill and warranty measures" are also to blame for tighter margins.
But just in case you thought this mess was all BMW's doing, the company — which is a major player in both the Chinese and US markets — has also made it clear that "the continuing international trade conflicts" are also playing their part, by "feeding uncertainty". It's difficult to imagine this is referring to anything other than the tit-for-tat trade war between the US and China.
BMW had already announced that it would raise US-made X5 and X6 prices in China to cope with the increased tariffs. Crucially, though, the price rise was less than the additional tariff levied on them, meaning BMW itself was footing its share of the bill. With the luxury car market in China already massive and only set to get bigger, BMW didn't really have much choice; better to take a year or two of reduced profits than risk losing your foothold in such a lucrative market.