High-margin car sales help BMW, Porsche ramp up EV investments

Apart from Opel, German car manufacturers can look back on a lucrative year - especially the ones that call themselves premium. Amongst other things, the sales increase allows them to ramp up their investments in the electrification of their line-up and the development of brand-new EVs.

Today, Porsche announced that after the most successful year in the company’s history, employees at Porsche AG will receive a special bonus of up to 9,300 euro gross. That still leaves enough money for the company to double its investments in electromobility from €3 billion to €6 billion by 2022. Some €500 million of the extra investment freed up by Porsche will be used for the development of Mission E variants and derivatives, around €1 billion for electrification of the existing range, several hundred million for the expansion of sites, plus around €700 million for charging infrastructure, smart mobility solutions and new technologies.

This morning, BMW declared at its annual press conference it would also be increasing its R&D spendings - to a staggering €7 billion this year - in preparation of the 25 electrified models (12 of which pure electric) it wants to bring to market by 2025. Interestingly, the Bavarian car maker expects group pretax profit to be over €10 billion in 2018, in spite of the increased costs.

Thank you, SUV & luxury

BMW's 5.3 percent rise in operating profit last year is largely attributable to surging demand for high-margin SUVs. Sales of luxury cars are expected to continue rising this year. "In the automotive segment we expect to achieve new all-time highs in 2018. As long as conditions remain stable, we should see a light increase in deliveries from growth in China and the U.S. in particular," Chief Financial Officer Nicolas Peter said in a statement.

The carmaker is however weary of Trump's plans to increase import duties for foreign cars. Like BMW, Porsche is heavily dependent on the U.S.A. The sports car brand does not have production facilities on American soil, meaning it could be heavily affected by the announced import taxes. BMW builds the X3, X4, X5 and X6 in Spartanburg, South Carolina. If the EU however decides to take countermeasures, European sales of the America-built SUVs could face strong headwind.

Picture copyright: Porsche AG, 2018