Superimposed Transformation Of The Epidemic: The German Luxury Car Brand Weighs Ahead.

"Affected by the global epidemic, BMW has closed its factories in Europe and South Africa, and has been shut down for 4 weeks to April 19th." On the afternoon of March 18th, at the beginning of the 2019 fiscal year, Qi Puce, chairman of BMW group, explained the focus of attention.

"On the whole, all European factories including Ding Gefen, Regensburg, Leipzig, Roslin, Munich and Oxford factories are affected, and 30 thousand employees are expected to be affected by the shutdown." Nord Corvo Chi, director of BMW group responsible for production, explained further.

In fact, the European automobile companies under the impact of the epidemic are not immune to the situation, and the factories that are affected by the production conditions are not the BMW ones.

A few days ago, Volkswagen Group CEO Herbert Dis said publicly that since the 17 day factories in Europe were shut down and shut down, according to the development of the epidemic in recent days, the stoppage of production and shutdown will probably continue for several weeks (originally scheduled for 2-3 weeks), which is beyond the expectations of the group and forced the company to change its original plan. At the same time, Audi will also shut down factories in Belgium, Germany, Hungary and Mexico.

In order to curb the spread of the new coronavirus pneumonia, Daimler has also suspended production in most European factories. The temporary shutdown time is two weeks. In the later stage, it will decide whether to extend according to the epidemic situation.

The impact of the spread of the epidemic is not only on stoppage but also in the closure of several economies. In the past month, the German DAX index has fallen by more than 1/3, and car companies have suffered the most. The price of Daimler and Volkswagen has fallen by 44%-48% in the past four weeks. This has also increased the risk of foreign companies competing to buy German companies at discounted prices, especially those facing financial difficulties.

This is hardly optimistic for the German luxury car brands that are undergoing transformation from traditional cars to electrification.

The pressure of profit and the pain of transformation

Local time on March 20th, with the release of Audi's 2019 financial report, the financial data of German luxury car brands were released.

From the data point of view, although the operating income of the three largest luxury brands in Germany is increasing, only Audi has achieved a profit growth. BMW and Daimler have seen "increasing profits without increasing profits".

"We are not satisfied with our final profit performance. Overall, the major adjustment factors have had an impact on our financial performance last year. " Prior to this, Daimler group chairman of the board of directors, Kang Lin Song, said at the earnings conference.

It is understood that Daimler group's operating income reached 172 billion 700 million euros in 2019, an increase of 3% over the same period last year. However, due to the legal procedures and related initiatives such as the air bag problem, restructuring and M & A transactions, its operating profit is only 4 billion 300 million euros, down 61% compared with 2018.

Similarly, BMW's operating profit in 2019 was only 7 billion 400 million euros, which declined by 17% compared with 2018, and its net profit was 5 billion 22 million euros, compared with the 7 billion 207 million euro 2018 in fiscal year 7 billion 207 million, while its operating income was as high as 104 billion 200 million euros because of the provision of 1 billion 400 million euros and a large number of R & D investment related to the EU's anti-monopoly fines.

In fact, continuous high R & D investment has become an important factor of "swallowing" luxury brand profits in recent years. Daimler group's R & D investment in 2019 reached 9 billion 700 million euros, an increase of 6% over the same period, while Audi's smallest volume, but also invested 4 billion 400 million euros, an increase of nearly 6%.

Since 2015, BMW group's R & D investment has been more than 5 billion euros for five consecutive years. In the 2019 fiscal year, the R & D cost of BMW spent 5 billion 952 million euros, up 11.9% from the same period last year, the highest growth rate among the three brands.

Behind the huge R & D investment is the pressing transformation pressure of traditional car companies. In order to cope with the global automobile industry downturn and external instability factors, German luxury brands have to make quick adjustments to carry out the road of transformation.

According to the latest EU regulations, the average carbon dioxide emissions of 95% of new cars sold in EU countries in 2020 were below 95 g / km. By 2021, the average carbon dioxide emissions of new cars sold in EU countries will be below 95 grams / km.

In March 2019, Daimler group met with Volkswagen Group and BMW group. The three sides agreed that the future belongs to "electric vehicle". In the next 10 years, they will focus on electric vehicles, including pure electric and plug-in hybrid electric vehicles.

At present, the Daimler group is planning to increase the capacity of electric vehicles, and will produce power batteries in nine factories around the world. Among them, Mercedes Benz plans to increase the total sales volume of pure electric vehicles and plug-in hybrid cars by three times by 2020.

Audi believes that electrification is the trend in the future. By 2025, Audi's electric vehicle sales will account for about 40% of the world's total sales.

Mr Qi believes that the market for high-end luxury cars will continue to grow before 2030. Therefore, BMW plans to provide five pure electric vehicle models by the end of 2021, and plans to deliver 1 million new energy vehicles to global customers.

However, facing the pain of profit pressure and electric transformation, how to balance the transition between electric power and profitability is a problem that every brand must consider.

Reduce costs and increase efficiency to improve business conditions

BMW believes that the increasingly severe global automotive market, exchange rate fluctuations and raw material prices, as well as electric vehicles, future travel and other core business transformation and development of multiple factors, and so on, all have a negative impact on profits.

Under the pressure of epidemic and electric transformation, BMW lowered its profit forecast in 2020. "In 2020, the company's profit margin will be reduced to 2% to 4%." On March 18th, Nicholas Peter, director of financial affairs of BMW group, said at a press conference that the global market is declining and the future is full of uncertainties.

As for the financial targets for 2020, Peter said cash flow and profit margins were the focus of BMW's work and will take a series of measures to increase revenue and reduce expenditure.

"Profitability is very important for us to seize future opportunities." Qi Pu said that in order to make up for the layout of the future high technology pre investment, BMW Group continued to implement the Performance NEXT plan launched in 2017 to continuously improve operational efficiency.

"This will save the group at least 12 billion euros by 2022." "There will be a more long-term future after the outbreak," he said. We will continue to maintain our long-term strategic objectives. Before 2025, we will invest more than 30 billion euros in R & D. "

In order to further reduce expenses, Daimler launched the new company structure in 2019, which was divided into three major business operations, including Mercedes Benz Corp, Daimler Truck Company and Daimler mobile travel company.

At the same time, after layoffs in 2019, Daimler predicted that by the end of 2022, Daimler will reduce its labor costs by more than 1 billion 400 million euros on the basis of cutting management positions.

Audi launched the Audi transformation plan two years ago, and plans to achieve a 15 billion euro capital savings target in 2022. The transformation of Audi is proceeding according to plan. Since its launch, it has saved 4 billion 400 million euros.

In addition, Audi has launched the Audi future plan, which will improve the efficiency and flexibility of German factories and pave the way for the production of electric cars in Germany. By 2029, the plan is expected to generate 6 billion euros in revenue. By 2024, Audi plans to invest 37 billion euros, of which 12 billion euros will be used for electric production and R & D.

In order to achieve efficient and competitive cost structure, Audi's parent company Volkswagen Group will integrate all software development work related to vehicle to the newly established Car.Software department, and the idea of modularization and platform system will be introduced into the field of digital software.

In the future, Audi will continue to benefit from the synergy effect of integrating group resources and optimizing the cost of bicycle software. In addition, Audi will benefit from the automatic driving cooperation project between Volkswagen and Ford motor. With the further improvement of efficiency, the strategic objectives of Audi group's R & D expenditure and capital expenditure ratio rose to 5% to 6% respectively (6.5%-7.0% and 5.5%-6.0% respectively).

"Audi is the only brand in the Volkswagen group that can integrate all platforms and technologies for us. It also enjoys the synergy effect and scale economy of the Volkswagen Group in many aspects, such as procurement and logistics."

A long-term concern about the development of luxury brands, told reporters on twenty-first Century economic report, in the long run, Audi in reducing costs, raising R & D funds, the biggest advantage of profit growth is relying on the technology and cost advantages brought by the Volkswagen Group.