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Bayerische Motoren Werke AG

Quarterly Report May 7, 2019

50_10-q_2019-05-07_4ed8887a-fe48-40c1-8e7e-289e32a0faf7.pdf

Quarterly Report

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QUARTERLY STATEMENT

31 March 2019

CONTENTS

1 BMW GROUP AT A GLANCE

Page 4 BMW Group in Figures

2 INTERIM GROUP MANAGEMENT REPORT

  • Page 9 Report on Economic Position
  • Page 9 General Economic Environment
  • Page 10 Automotive Segment
  • Page 15 Financial Services Segment
  • Page 16 Report on Outlook, Risks and Opportunities
  • Page 16 Outlook
  • Page 18 Risks and Opportunities

3 INTERIM GROUP FINANCIAL STATEMENTS

  • Page 20 Income Statement
  • Page 22 Balance Sheet
  • Page 24 Cash Flow Statement

4 OTHER INFORMATION

Page 27 Contacts

BMW GROUP AT A GLANCE

Page 4 BMW Group in Figures

1

BMW Group at a Glance

BMW Group in Figures

BMW GROUP IN FIGURES

Key performance indicators reported during the year

• 01

1st quarter 2019 1st quarter 2018 Change in %
Group
Profit before tax1 € million 762 3,139 – 75.7
Automotive segment
Deliveries2 units 605,333 604,629 0.1
EBIT margin3 % (change in %pts) –1.6 9.7 –11.3
Motorcycles segment
Deliveries units 38,606 35,858 7.7
EBIT margin3 % (change in %pts) 15.2 14.7 0.5

1 Prior year figures adjusted due to first-time application of IFRS 16; see note 5 to the Group Financial Statements for the year ended 31 December 2018.

2 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2019: 128,653 units, 2018: 108,274 units).

3 Profit before financial result as percentage of segment revenues.

5

Further performance figures

• 02

1st quarter 2019 1st quarter 2018 Change in %
Automotive segment
Deliveries
BMW1 units 519,307 517,447 0.4
MINI units 84,820 86,375 –1.8
Rolls-Royce units 1,206 807 49.4
Total1 605,333 604,629 0.1
Production volume
Total2 672,042 663,333 1.3
Financial Services segment
New contracts with retail customers 469,624 451,908 3.9
Free cash flow Automotive segment € million – 559 302
Group revenues3 € million 22,462 22,665 – 0.9
Automotive € million 19,213 19,326 – 0.6
Motorcycles € million 586 524 11.8
Financial Services3 € million 7,146 6,561 8.9
Other Entities € million 1 2 – 50.0
Eliminations3 € million – 4,484 – 3,748 –19.6
Group profit/ loss before financial result (EBIT)3 € million 589 2,707 – 78.2
Automotive € million – 310 1,881
Motorcycles € million 89 77 15.6
Financial Services3 € million 648 561 15.5
Other Entities € million 4 9 – 55.6
Eliminations3 € million 158 179 –11.7
Group profit/ loss before tax (EBT)3 € million 762 3,139 – 75.7
Automotive € million – 27 2,281
Motorcycles € million 87 78 11.5
Financial Services3 € million 627 553 13.4
Other Entities € million – 58 70
Eliminations3 € million 133 157 –15.3
Group income taxes3 € million – 218 – 857 74.6
Profit/ loss from continuing operations3 € million 544 2,282 – 76.2
Profit / loss from discontinued operations € million 44
Group net profit3 € million 588 2,282 – 74.2
Earnings per share3, 4 0.85 / 0.85 3.44 / 3.44 – 75.3 / – 75.3
Group pre-tax return on sales3, 5 % (change in %pts) 3.4 13.8 –10.4

1 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2019: 128,653 units, 2018: 108,274 units).

2 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2019: 138,391 units, 2018: 107,271 units).

3 Prior year figures adjusted due to first-time application of IFRS 16; see note 5 to the Group Financial Statements for the year ended 31 December 2018.

In addition, figures for the prior year have been adjusted due to changes in presentation of selected items, which are not material overall.

4 Common / preferred stock. In computing earnings per share of preferred stock, earnings to cover the additional dividend of €0.02 per share of preferred stock

are spread over the quarters of the corresponding financial year. 5 Group profit before tax as a percentage of Group revenues.

BMW Group at a Glance

BMW Group in Figures

Automobile deliveries at new record level

Despite an increasingly challenging political and economic environment, deliveries of BMW Group automobiles to customers in the first quarter of 2019 were again up on the previous year's high level, setting a new volume record for the opening three-month period of a financial year. In total, the BMW Group delivered 605,333* BMW, MINI and Rolls-Royce brand vehicles to customers worldwide (2018: 604,629* units; + 0.1%).

The volume performance in March 2019 marked the BMW Group's most successful month in its corporate history, with 263,319 units delivered. The Group was able to buck the general trend in key markets such as the USA and China compared to the same month one year earlier.

A total of 469,624 new credit financing and leasing contracts were signed with retail customers during the first quarter of the year (2018: 451,908 contracts; + 3.9%). The contract portfolio of the Financial Services segment at 31 March 2019 comprised 5,735,975 contracts, similar to the level three months earlier (31 December 2018: 5,708,032 contracts; + 0.5%).

Earnings reduced by recognition of high provision

In an ad hoc announcement dated 5 April 2019, the BMW Group reported that the EU Commission had informed it of a "Statement of Objections" in the course of ongoing antitrust proceedings. The EU Commission is investigating whether German automobile manufacturers cooperated in technical working groups to restrict competition in the development and rollout of emission-reduction technologies. The Statement of Objections leads the BMW Group to believe that it is probable ("more likely than not") that the EU Commission will issue a significant fine. If necessary, the BMW Group will contest the EU Commission's allegations with all the legal means at its disposal.

Irrespective of this, the fact that a fine is "more likely than not" triggers a requirement to recognise a provision in accordance with International Financial Reporting Standards. Based on information currently available and in light of financial impacts that cannot yet be definitively assessed, a short term other provision was recognised in accordance with the International Financial Reporting Standards of around € 1.4 billion in the first quarter. This effect had a negative impact on both the Group's and the Automotive segment's first-quarter earnings. The review of the Statement of Objections and the inspection of files will take some time. Consequently, it is not yet possible to assess the ultimate financial impact definitively.

* Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2019: 128,653 units, 2018: 108,274 units).

BMW Group in Figures

Group revenues in the first three months of 2019 totalled € 22,462 million, similar to the level recorded one year earlier (2018: € 22,665 1 million; – 0.9%). Group profit before financial result fell sharply to € 589 million (2018: € 2,707 1 million; – 78.2 %). The provision recognised in connection with ongoing antitrust proceedings had a particularly negative impact on reported figures. Earnings were also adversely affected by intensified competition on the one hand and increases in production costs, depreciation and personnel expenses on the other.

Regardless of these developments, the BMW Group continues to invest heavily in the mobility of the future. This fact is reflected in the rising level of expenses and upfront expenditure incurred for the product offensive and for new mobility services. Accordingly, the Group's pre-tax profit of € 762 million was also significantly lower than one year earlier (2018: € 3,139 1 million; – 75.7%).

Research and development ratios • 03

in % 1st quarter 2019 1st quarter 2018 Change in %
Research and development expenses as a percentage of revenues % (change in %pts) 6.2 5.7 0.5
Research and development expenditure ratio2 % (change in %pts) 6.0 5.6 0.4
Capitalisation rate3 % (change in %pts) 26.5 24.8 1.7
Research and development expenses € million 1,396 1,288 8.4
Research and development expenditure4 € million 1,353 1,272 6.4

1 Prior year figures adjusted due to first-time application of IFRS 16; see note 5 to the Group Financial Statements for the year ended 31 December 2018.

In addition, figures for the prior year have been adjusted due to changes in presentation of selected items, which are not material overall.

2 Research and development expenditure as a percentage of Group revenues.

3 Capitalised development costs as a percentage of research and development expenditure.

4 Total research and development expenditure comprises research costs, non-capitalised development costs and capitalised development costs (excluding amortisation thereon).

The first-quarter financial result was € 259 million down on the previous year. The main factors here were lower fair values of interest rate derivatives and, in the Automotive segment, a preliminary one-off positive revaluation effect of € 328 million arising from the pooling of mobility services with the Daimler Group. The previous year's financial result also included a positive revaluation effect of € 209 million in conjunction with the takeover of DriveNow.

Financing activities

The BMW Group issued bonds for a total amount of € 5.2 billion during the reporting period, including its first so-called Panda bond on the Chinese capital market. In addition, ABS transactions were issued in the USA, as well as in the UK, China and Japan totalling € 2.4 billion.

Impact of IFRS 16

The BMW Group has applied the new accounting requirements for leases in accordance with IFRS 16 (Leases) with effect from 1 January 2019. As a general rule, the new Standard requires lessees to recognise right-of-use assets and lease liabilities for all leases. Accordingly, the BMW Group recognised right-ofuse assets within property, plant and equipment and lease liabilities within financial liabilities at the date

of adoption. As a result of the change in accounting policy for leases previously classified as operating leases, the balance sheet total increased by approximately € 2.4 billion. In conjunction with the adoption of IFRS 16, the methods used to account for leases as a lessor have also been reviewed, resulting in a change in accounting policy for selected items with effect from the financial year 2019. The change in accounting policy for lessors was applied retrospectively, with comparative figures restated. The opening balance sheet as at 1 January 2018 and figures for the financial year 2018 were restated accordingly. Further information on the impact of IFRS 16 is provided in the Group Financial Statements for the year ended 31 December 2018.

INTERIM GROUP MANAGEMENT REPORT

  • Page 9 Report on Economic Position
  • Page 9 General Economic Environment
  • Page 10 Automotive Segment
  • Page 15 Financial Services Segment

Page 16 Report on Outlook, Risks and Opportunities

Page 16 Outlook

Page 18 Risks and Opportunities

Interim Group Management Report

Report on Economic Position General Economic Environment

REPORT ON ECONOMIC POSITION

GENERAL ECONOMIC ENVIRONMENT

Automobile markets down worldwide

BMW Group automobile deliveries at new record level

International automobile markets

International automobile markets performed weakly at the start of the year, with new registrations down year-on-year for the period from January to March (20.6 million units; – 5.2%). Key automobile markets developed as follows:

International automobile markets • 04

in units Change in %
Europe – 3.1
thereof Germany 0.2
thereof France – 0.7
thereof Italy – 6.9
thereof Spain – 6.9
thereof United Kingdom (UK) – 2.4
USA – 2.5
China –10.1
Japan – 0.9
Russia – 0.8
Brazil 13.7
Total – 5.2

Interim Group Management Report

Report on Economic Position General Economic Environment Automotive Segment

Automotive Segment

(2018: 807 units; + 49.4 %). At 84,820 units, MINI deliveries remained slightly below the previous year's record level (2018: 86,375 units; – 1.8 %).

Vehicle deliveries at new high level

During the period from January to March 2019, the BMW Group delivered 605,3331 BMW, MINI and Rolls-Royce brand vehicles to customers (2018: 604,6291 units; + 0.1 %), thereby achieving a new first-quarter high for the ninth year in succession. BMW delivered 519,3071 units worldwide, surpassing the previous year's record figure (2018: 517,4471 units; + 0.4 %). Rolls-Royce Motor Cars also achieved the best first-quarter volume performance in its history with 1,206 units delivered to customers

Dynamic sales growth in China

In Asia, deliveries of the Group's three brands rose slightly by 2.1 % to 217,2001 units in the first three months of 2019 (2018: 212,6931 units). This performance was mainly achieved on the back of continued dynamic growth in China, where the BMW Group delivered 168,6631 BMW, MINI and Rolls-Royce brand vehicles to customers, outperforming the market as a whole with a significant increase of 10.2 % (2018: 153,0941 units).

Automotive segment deliveries of vehicles by region and market • 05

in units 1st quarter 2019 1st quarter 2018 Change in %
Europe 270,950 270,725 0.1
thereof Germany 72,592 68,294 6.3
thereof UK 62,368 61,281 1.8
Americas 104,215 106,348 – 2.0
thereof USA 83,158 84,630 –1.7
Asia1 217,200 212,693 2.1
thereof China1 168,663 153,094 10.2
Other markets 12,968 14,863 –12.7
Total1 605,333 604,629 0.1

In Europe, the BMW Group delivered 270,950 vehicles to customers in the first quarter of 2019, similar to the previous year's level (2018: 270,725 units; + 0.1%) despite a slight drop in market momentum overall. In Germany, the BMW Group recorded solid growth of 6.3% in the three-month period under report, with deliveries up to 72,592 units (2018: 68,294 units). Despite continuing uncertainty about Brexit, deliveries in the UK rose slightly by 1.8% to 62,368 units (2018: 61,281 units).

First-quarter deliveries in the Americas region were down on the previous year, mainly due to the contracting US market. Throughout the region, the BMW Group delivered 104,215 BMW, MINI and Rolls-Royce brand vehicles during the first three months of the year (2018: 106,348 units; – 2.0 %). The number delivered in the USA fell slightly to 83,158 units (2018: 84,630 units; – 1.7%).

Automotive segment at a glance • 06

1st quarter 2019 1st quarter 2018 Change in %
Deliveries1, 2 units 605,333 604,629 0.1
Production3 units 672,042 663,333 1.3
Revenues € million 19,213 19,326 – 0.6
Profit / loss before financial result (EBIT) € million – 310 1,881
Profit / loss before tax € million – 27 2,281
EBIT margin2 % (change in %pts) –1.6 9.7 –11.3

1 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2019: 128,653 units, 2018: 108,274 units).

2 Key performance indicators reported on during the year.

3 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2019: 138,391 units, 2018: 107,271 units).

Interim Group Management Report Report on Economic Position General Economic Environment

Automotive Segment

BMW surpasses previous year's record figure*

At 519,307 units, deliveries of BMW brand vehicles in the first quarter surpassed the previous year's record level (2018: 517,447 units; + 0.4%), assisted by strong contributions from the BMW X family of models and the brand's electrified vehicles. The BMW X1 and X5, for instance, were the best-selling models in their respective segments. Deliveries of the X3 doubled after the latest model launch. The new BMW X7 and Z4 as well as the new 8 Series are also expected to generate additional volume growth over the remainder of the year.

With the current BMW 3 Series at the end of its product life cycle, first-quarter deliveries of 90,007 units were slightly down on the previous year (2018: 93,819 units; – 4.1%). The seventh generation of the highly successful BMW 3 Series has been available since March 2019 and is likely to drive increased demand over the remainder of the year. At 78,401 units, deliveries of the BMW 5 Series fell short of the previous year's

very high level (2018: 94,733 units; – 17.2%). The new BMW Z4 and BMW 8 Series models both got off to an excellent start, recording deliveries of 1,550 units and 2,194 units respectively during the period under report.

The BMW X family remained extremely popular, with first-quarter deliveries up by almost a quarter to 221,132 units (2018: 178,313 units; + 24.0%). The new BMW X3 made the greatest contribution, with deliveries more than doubling to 71,427 units (2018: 33,769 units). First-quarter deliveries of the X5 fell to 36,871 units (2018: 41,178 units; – 10.5%), mainly because not all of the model's engine variants are available in China as yet. However, as the year progresses, deliveries of the X5 are set to benefit increasingly from full availability of the engine variants. The next generation of the successful X5 model has been in the showrooms since the end of 2018. The new BMW X7 went on sale for the first time in March 2019. The top model got off to a very promising start.

Automotive segment deliveries of BMW vehicles by model series* • 07

in units 1st quarter 2019 1st quarter 2018 Change in %
BMW 1 Series 45,575 53,727 –15.2
BMW 2 Series 29,331 41,691 – 29.6
BMW 3 Series 90,007 93,819 – 4.1
BMW 4 Series 23,180 27,636 –16.1
BMW 5 Series 78,401 94,733 –17.2
BMW 6 Series 6,113 5,960 2.6
BMW 7 Series 11,956 13,163 – 9.2
BMW 8 Series 2,194
BMW Z4 1,550
BMW X1 65,360 77,296 –15.4
BMW X2 23,250 4,591
BMW X3 71,427 33,769
BMW X4 13,632 11,331 20.3
BMW X5 36,871 41,178 –10.5
BMW X6 8,156 10,148 –19.6
BMW X7 2,436
BMW i 9,868 8,405 17.4
BMW total 519,307 517,447 0.4

* Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2019: 128,653 units, 2018: 108,274 units).

Interim Group Management Report Report on Economic Position General Economic Environment

Automotive Segment

MINI achieves second-best first quarter

MINI achieved its second-best first-quarter volume performance to date with 84,820 units delivered during the three-month period (2018: 86,375 units; – 1.8%). At 43,880 units, deliveries of the MINI 3- and 5-door

models were at a similar level to the previous year (2018: 44,069 units; – 0.4 %). Deliveries of the MINI Countryman dropped moderately during the first quarter to 22,694 units (2018: 23,880 units; –5.0%).

Automotive segment deliveries of MINI vehicles by model variant

• 08

in units 1st quarter 2018 Change in %
MINI Hatch (3- and 5-door) 43,880 44,069 – 0.4
MINI Convertible 7,822 7,183 8.9
MINI Clubman 10,424 11,243 – 7.3
MINI Countryman 22,694 23,880 – 5.0
MINI total 84,820 86,375 – 1.8

Rolls-Royce posts new first-quarter volume record

Rolls-Royce Motor Cars recorded an excellent start to the year with its best first-quarter performance to date. Worldwide, 1,206 Rolls-Royce brand vehicles were delivered to customers during the three-month period

under report (2018: 807 units; + 49.4 %). Both the Phantom* with 140 units (2018: 125 units; + 12.0 %) and the new Cullinan* with 545 units contributed to this success.

Automotive segment deliveries of Rolls-Royce vehicles by model variant

• 09

in units 1st quarter 2019 1st quarter 2018 Change in %
Phantom* 140 125 12.0
Ghost 177 233 – 24.0
Wraith /Dawn 344 449 – 23.4
Cullinan* 545
Rolls-Royce total 1,206 807 49.4

Significant growth for BMWi

The percentage of electrified vehicles delivered remained stable during the first quarter of 2019. The BMW Group therefore occupies a leading position in the premium segment with regard to electrified vehicles. First-quarter deliveries of 27,044 units were similar to the previous year (2018: 26,858 units; + 0.7 %) as a result of model changes. Beginning in the third quarter of 2019, plug-in hybrid variants of the 3 Series and X5 should further stimulate demand. BMWi models recorded a significant increase, with deliveries up by almost one fifth to 9,868 units (2018: 8,405 units; + 17.4 %). The MINI Cooper SE Countryman ALL4* showed even stronger growth during the three-month period, with deliveries up by more than 60% to a total of 4,019 units (2018: 2,499 units; + 60.8%).

Automotive segment deliveries of electrified models • 10

1st quarter 2019 1st quarter 2018 Change in %
9,868 8,405 17.4
13,157 15,954 –17.5
4,019 2,499 60.8
27,044 26,858 0.7

*Fuel consumption and CO2 emissions information are available on page 18.

Environment Automotive Segment

Earnings reduced in particular by high provision for ongoing antitrust proceedings

At € 19,213 million, revenues recorded by the Automotive segment during the period under report were at a similar level to the previous year (2018: € 19,326 million; – 0.6%). Localisation of production of the X3 in China as well as greater competition worldwide had a negative impact on segment revenues. Adjusted for currency factors, first-quarter revenue fell slightly compared to the previous year.

Cost of sales increased slightly during the period under report, mainly due to adverse currency factors and higher raw materials prices as well as increased production costs as a result of stricter regulatory requirements. Other items impacting earnings included higher costs and upfront expenditure for research and development in connection with the wide-ranging electrification of the vehicle fleet and autonomous driving, higher personnel expenses due to the increased workforce size and collectively bargained pay increases, as well as higher depreciation of property, plant and equipment and amortisation of capitalized development costs.

The expense for recognising a current provision for the ongoing antitrust proceedings referred to above is included in other operating expenses. As a result of these various factors, first-quarter segment EBIT deteriorated significantly from a positive € 1,881 million in 2018 to a negative € 310 million in 2019.

The EBIT margin fell accordingly to negative 1.6% (2018: 9.7%; – 11.3 percentage points). The segment result before tax for the three-month period (loss before tax of € 27 million) was therefore also well down on the previous year's figure (2018: profit before tax of € 2,281 million).

Free cash flow and net financial assets

Free cash flow for the Automotive segment in the first quarter of the year was as follows:

Free cash flow Automotive segment for the period from 1 January to 31 March • 11

in € million 2019 2018 Change
Cash inflow (+)/ outflow (–) from operating activities 2,033 1,354 679
Cash inflow (+)/ outflow (–) from investing activities – 2,595 – 710 –1,885
Net investment in marketable securities and investment funds 3 – 342 345
Free cash flow Automotive segment – 559 302 – 861

Higher cash inflows from operating activities of the Automotive segment for the first three months of 2019 were attributable above all to the less pronounced rise in working capital, mainly reflecting the higher level of trade payables. The increase in inventories was on a similar scale to one year earlier, reflecting the impact of seasonal factors, model changes (BMW X5 and 3 Series) and the launch of the BMW X7. Higher cash outflows from investing activities were mainly attributable to equity increases at the level of the YOUR NOW companies and

expansion investments in the Group's production network, including in Mexico. Following the adoption of IFRS 16, lease payments are now included in cash flows from financing activities. In the first quarter of 2019, the change had a positive effect of € 108 million on free cash flow. If IFRS 16 had been applied similarly in the previous year, free cash flow would have been positively influenced by approximately the same amount.

Net financial assets comprised the following:

in € million 31. 3. 2019 31.12. 2018 Change
Cash and cash equivalents 9,637 8,631 1,006
Marketable securities and investment funds 4,398 4,321 77
Intragroup net financial assets 5,940 7,694 –1,754
Financial assets 19,975 20,646 – 671
Less: external financial liabilities* – 3,338 –1,158 – 2,180
Net financial assets Automotive segment 16,637 19,488 – 2,851

Net financial assets Automotive segment • 12

*Excluding derivative financial instruments.

Interim Group Management Report Report on Economic Position General Economic

Environment Automotive Segment The decrease in net financial assets in the Automotive segment was mainly attributable to the recognition of lease liabilities amounting to €2.3 billion, recognised in connection with the first-time application of the IFRS 16.

BMW and Daimler combine mobility services

On 28 March 2018, the BMW Group signed an agreement with Daimler – subject to anti-trust approval – regarding the merger of certain business units that provide mobility services. Following approval by the relevant antitrust authorities, the transaction was completed on 31 January 2019. As planned, the two companies are pressing ahead to realise their joint vision of fully electric and autonomous on-demand mobility, including strategic plans to expand existing offerings in the field of individual urban mobility. The new range of mobility services will be easy to access, intuitive to use, and will cater to customers' needs. The cooperation comprises the joint ventures REACH NOW (on-demand mobility and multimodal services), CHARGE NOW (charging), FREE NOW (ride-hailing), PARK NOW (parking) and SHARE NOW (car-sharing). Under the umbrella YOUR NOW, BMW and Daimler will jointly offer innovative solutions for cities and municipalities seeking to make mobility more efficient and sustainable.

BMW and Daimler each hold an equal share in the joint ventures that comprise the mobility services referred to above. As a result of the merger, the BMW Group's interests are now carried as investments accounted for using the equity method and have been remeasured to their fair value, with a carrying amount of € 1.6 billion. The first-quarter financial result includes a preliminary revaluation gain of € 328 million. The work on opening balance sheets at the merger date and the calculation of the final purchase prices have not yet been finalised. For this reason, the final purchase prices cannot yet be determined definitively. Similarly, purchase price allocations have not yet been finalised.

Report on Economic Position General Economic Environment

Financial Services Segment

Financial Services Segment

Financial Services business remains strong

Revenues and profit before tax in the Financial Services segment both improved during the period under report, driven by portfolio growth and the positive impact of the sale of vehicles previously leased to customers. In addition to higher business volumes, the Financial Services segment also benefited from a generally stable risk situation, which was reflected in lower risk provisioning expenses for residual values in a number of markets.

The business volume of the segment in balance sheet terms rose due to currency effects and growth in new business with retail customers, partially offset by a slight reduction in dealership financing receivables.

Slight increase in new business with retail customers

The increase in credit financing and leasing business with retail customers was mainly attributable to growth in China. Slight growth was recorded for both leasing business (+ 4.9%) and credit financing business (+ 3.5%). Overall, leasing accounted for 33.2% and credit financing for 66.8% of new business in the period under report.

In the pre-owned vehicle financing and leasing lines of business relating to the BMW and MINI brands, 95,211 new contracts were signed during the first quarter of 2019 (2018: 98,268 contracts), 3.1% fewer than in the same period one year earlier.

The total volume of all new credit financing and leasing contracts concluded with retail customers during the three-month period amounted to € 13,898 million, representing a solid 5.7% increase compared to the previous year (2018: € 13,145 million).

Compared to the end of the previous financial year, the Financial Services segment's worldwide contract portfolio with retail customers grew by 1.0 % to 5,285,572 contracts at 31 March 2019 (31 December 2018: 5,235,207 contracts). The China region registered the highest growth rate during the three-month period (+ 6.0 %). The Europe / Middle East / Africa region (+ 1.2%) and the EU Bank 2 region (+ 1.1%) also recorded growth. The number of contracts in place with retail customers in the Americas and Asia / Pacific regions fell by 0.9% and 1.0% respectively.

During the first quarter, 50.0 % 3 of new BMW Group vehicles were either leased or financed by the Financial Services segment (2018: 47.3 %; + 2.7 percentage points). The increase was largely attributable to growth in credit financing in China.

Fleet business at previous year's level

In the fleet management business, the BMW Group – operating under the brand name Alphabet – is one of Europe's foremost leasing and full-service providers. Alphabet offers leasing and financing arrangements as well as other specific services to commercial customers. A portfolio of 703,823 contracts was in place at 31 March 2019 (31 December 2018: 700,080 contracts; + 0.5%).

Dealership financing slightly down on previous year

In the first quarter, the total volume of dealership financing decreased slightly by 2.4% compared to the end of 2018 to € 19,957 million (31 December 2018: € 20,438 million).

Financial Services segment at a glance

• 13

1st quarter 2019 1st quarter 2018 Change in %
469,624 451,908 3.9
€ million 7,146 6,561 8.9
€ million 648 561 15.5
€ million 627 553 13.4
31. 3. 2019 31. 12. 2018 Change in %
Total contract portfolio 5,735,975 5,708,032 0.5
Contract portfolio with retail customers 5,285,572 5,235,207 1.0
Business volume in balance sheet terms1, 4 € million 135,314 133,147 1.6

1 Prior year figures adjusted due to first-time application of IFRS 16; see note 5 to the Group Financial Statements for the year ended 31 December 2018.

In addition, figures for the prior year have been adjusted due to changes in presentation of selected items, which are not material overall.

2 EU Bank comprises BMW Bank GmbH, its branches in Italy, Spain and Portugal and its subsidiary in France.

3 The calculation only includes automobile markets in which the Financial Services segment is represented by a consolidated entity or a branch office.

4 Calculated on the basis of the lines Leased products and Receivables from sales financing (current and non-current) of the Financial Services segment balance sheet.

Interim Group Management Report

Report on Outlook, Risks and Opportunities Outlook

REPORT ON OUTLOOK, RISKS AND OPPORTUNITIES

New record for automobile deliveries targeted

EBIT margin reduced as result of recognition of provision for ongoing antitrust proceedings

OUTLOOK

The report on outlook, risks and opportunities describes the expected development of the BMW Group, including the significant risks and opportunities, from a Group management perspective. It contains forward-looking statements based on expectations and assessments that are subject to uncertainty. As a result, actual outcomes, including those attributable to political, legal and economic developments, could differ positively or negatively from those described below. Further information on this topic is provided in the Annual Report 2018 (Outlook, pp. 84, Risks and Opportunities, pp. 90).

Interim Group Management Report Report on Outlook, Risks and

Opportunities Outlook

Overall assessment by Group management

Business conditions are expected to remain volatile in the financial year 2019. While numerous new automobile and motorcycle models as well as an expanded range of individual mobility-related services will provide additional momentum, various political and economic challenges could well have an offsetting effect. Research and development expenses will remain at a high level in view of important future-oriented projects. Increasing manufacturing costs are also being influenced by stricter regulatory requirements. Accordingly, Group profit before tax is expected to decrease significantly. Automotive segment deliveries to customers are expected to increase slightly and reach a new record level. At the same time, fleet carbon dioxide emissions are forecast to drop slightly. The Group intends to achieve its targets with a workforce similar in size to the previous year. Without the effect of the provision for the antitrust allegations, the target range for the EBIT margin of between 6 and 8% has not changed. However, since the provision has a negative impact of 1.5 percentage points on the EBIT margin, a margin in the Automotive segment for 2019 between 4.5 and 6.5% is expected.

BMW Group key performance indicators

A significant decrease is forecast for the RoCE 1 of the Automobiles segment. The RoE 2 for the Financial Services segment should remain at the previous year's level. However, both performance indicators will be above their long-term targets of 26% (RoCE) and 14% (RoE) respectively. Deliveries to customers in the Motorcycles segment are forecast to show a solid increase, with the EBIT margin set to be within the target range of between 8 and 10% and the RoCE also showing a solid year-on-year increase.

Depending on the political, legal and economic situation and the risks and opportunities described in the Annual Report 2018, actual business performance could differ from current expectations.

Growing uncertainty, fuelled in particular by unresolved political situations such as Brexit and international trade and customs policies, may cause economic developments in many regions to deviate from expected trends and outcomes, with a correspondingly significant impact on the business performance of the BMW Group.

2018
reported
2018
adjusted3
2019
Outlook4
Group
Profit before tax € million 9,815 9,627 significant decrease
Workforce at year-end 134,682 in line with last
year's level
Automotive segment
Deliveries to customers5 units 2,490,664 slight increase
Fleet emissions6 g CO2 / km 128 slight reduction
EBIT margin % 7.2 between 4.5 and 6.5
Return on capital employed % 49.8 significant decrease
Motorcycles segment
Deliveries to customers units 165,566 solid increase
EBIT margin % 8.1 between 8 and 10
Return on capital employed1 % 28.4 solid increase
Financial Services segment
Return on equity 2 % 14.8 in line with last
year's level

1 RoCE in the Automotive and Motorcycles segments is measured on the basis of relevant segment profit before financial result and the average amount of capital employed in the segment concerned.

Capital employed corresponds to the sum of all current and non-current operational assets, less liabilities that do not incur interest.

2 RoE in the Financial Services segment is calculated as segment profit before taxes, divided by the average amount of equity capital attributable to the Financial Services segment balance sheet.

3 Prior year figures adjusted due to first-time application of IFRS 16; see note 5 to the Group Financial Statements for the year ended 31 December 2018.

4 Based on adjusted figures due to first-time application of IFRS 16.

5 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2018: 459,581 units).

6 EU-28.

• 14

Interim Group Management Report

RISKS AND OPPORTUNITIES

Report on Outlook, Risks and Opportunities Risks and Opportunities

As a globally operating enterprise, the BMW Group is exposed to a broad range of risks and opportunities. The Group's corporate success is based on leveraging perceived opportunities as they present themselves. In order to drive growth, boost profitability, bolster efficiency and work in a sustainable way going forward, the BMW Group also needs to take calculated risks.

Compared with the overall risk situation presented in the Group Management Report 2018, the assessment of legal risks in conjunction with antitrust allegations made against five German car manufacturers has become more concrete following receipt of the Statement of Objections from the EU Commission. The Statement of Objections leads the BMW Group to believe that it is probable ("more likely than not") that the Commission will issue a significant fine. If necessary, the BMW Group will contest the Commission's allegations with all the legal means at its disposal. A provision of approximately € 1.4 billion was recognised in accordance with International Financial Reporting Standards for negative financial impacts that cannot yet be definitively assessed. Furthermore, the progress of the Brexit negotiations and developments in global trade policy will continue to be closely monitored and factored into the Group's forecasts as deemed appropriate. Further information on risks and opportunities as well as on the methods employed to manage them is also available in the "Report on Risks and Opportunities" section of the Annual Report 2018 (pp. 90).

Fuel consumption and CO2 emissions information • 15

Model Fuel consumption
in l/100 km
(combined)
CO2 emissions
in g / km
(combined)
Electric power
consumption
in kWh /100 km
(combined)
MINI
MINI Cooper SE Countryman ALL4 2.5 – 2.4 56 – 55 13.7 –13.4
Rolls-Royce
Cullinan 15 341
Phantom 14.5 – 14.4 330 – 328

INTERIM GROUP FINANCIAL STATEMENTS

Page 20 Income Statement

  • Page 22 Balance Sheet
  • Page 24 Cash Flow Statement

BMW Group Income Statement

Financial

Income Statements for Group and Segments for the period from 1 January to 31 March

• 16

Group Automotive Motorcycles
in € million 2019 2018* 2019 2018 2019 2018
Revenues 22,462 22,665 19,213 19,326 586 524
Cost of sales –18,406 –17,825 –16,393 –15,659 – 438 – 392
Gross profit 4,056 4,840 2,820 3,667 148 132
Selling and administrative expenses – 2,122 – 2,177 –1,769 –1,810 – 59 – 56
Other operating income 164 197 171 200 1
Other operating expenses –1,509 –153 –1,532 –176
Profit/ loss before financial result 589 2,707 – 310 1,881 89 77
Result from equity accounted investments 157 223 157 223
Interest and similar income 35 38 87 81 1
Interest and similar expenses – 93 –103 –151 –133 – 2
Other financial result 74 274 190 229 –1 1
Financial result 173 432 283 400 – 2 1
Profit/ loss before tax 762 3,139 – 27 2,281 87 78
Income taxes – 218 – 857 7 – 645 – 25 – 23
Profit/ loss from continuing operations 544 2,282 – 20 1,636 62 55
Profit / loss from discontinued operations 44 44
Net profit/ loss 588 2,282 24 1,636 62 55
Attributable to minority interest 27 20 9 6
Attributable to shareholders of BMW AG 561 2,262 15 1,630 62 55
Basic earnings per share of common stock in € 0.85 3.44
Basic earnings per share of preferred stock in € 0.85 3.44
Dilutive effects
Diluted earnings per share of common stock in € 0.85 3.44
Diluted earnings per share of preferred stock in € 0.85 3.44

*Prior year figures adjusted due to first-time application of IFRS 16; see note 5 to the Group Financial Statements for the year ended 31 December 2018. In addition, figures for the prior year have been adjusted due to changes in presentation of selected items, which are not material overall.

Eliminations Other Entities Financial Services
2018* 2019 2018 2019 2018* 2019
Revenues – 3,748 – 4,484 2 1 6,561 7,146
Cost of sales 3,912 4,623 – 5,686 – 6,198
Gross profit 164 139 2 1 875 948
Selling and administrative expenses 2 4 – 7 – 4 – 306 – 294
Other operating income – 40 – 35 33 25 3 3
Other operating expenses 53 50 –19 –18 –11 – 9
Profit/ loss before financial result 179 158 9 4 561 648
Result from equity accounted investments
Interest and similar income – 293 – 431 249 378 1
Interest and similar expenses 271 406 – 239 – 345 – 2 –1
Other financial result 51 – 95 – 7 – 20
Financial result – 22 – 25 61 – 62 – 8 – 21
Profit/ loss before tax 157 133 70 – 58 553 627
Income taxes –12 – 42 – 22 19 –155 –177
Profit/ loss from continuing operations 145 91 48 – 39 398 450
Profit / loss from discontinued operations
Net profit/ loss 145 91 48 – 39 398 450
Attributable to minority interest 14 18
Attributable to shareholders of BMW AG 145 91 48 – 39 384 432
Basic earnings per share of common stock in €
Basic earnings per share of preferred stock in €
Dilutive effects
Diluted earnings per share of common stock in €
Diluted earnings per share of preferred stock in €

Interim Group Financial Statements

BMW Group Balance Sheet

BMW GROUP
BALANCE SHEET
Group Automotive Motorcycles
in € million 31. 3. 2019 1. 1. 20191 31.12. 20182 31. 3. 2019 31.12. 2018 31. 3. 2019 31.12. 2018
Assets
Intangible assets
Property, plant and equipment
11,058
22,134
10,971
22,163
10,971
19,801
10,558
21,648
10,472
19,372
100
387
95
399
Leased products 39,171 38,259 38,259
Investments accounted for using the equity method 4,555 2,624 2,624 4,555 2,624
Other investments 676 739 739 4,904 4,843
Receivables from sales financing 49,286 48,313 48,313
Financial assets 1,085 1,010 1,010 158 216
Deferred tax 2,426 1,640 1,638 3,534 3,043
Other assets 1,674 1,299 1,299 3,403 5,085 34 33
Non-current assets 132,065 127,018 124,654 48,760 45,655 521 527
Inventories 16,455 13,639 13,639 15,161 12,462 629 568
Trade receivables 2,948 2,546 2,546 2,634 2,287 179 167
Receivables from sales financing 39,146 38,700 38,700
Financial assets 6,426 6,675 6,675 4,864 4,988
Current tax 1,581 1,378 1,378 759 618
Other assets 9,688 9,906 9,906 24,307 22,016 3 2
Cash and cash equivalents 12,441 10,979 10,979 9,637 8,631 10 12
Assets held for sale 463 461 461
Current assets 88,685 84,286 84,284 57,362 51,463 821 749
Total assets 220,750 211,304 208,938 106,122 97,118 1,342 1,276
Equity and liab
ilities
Subscribed capital 658 658 658
Capital reserves 2,118 2,118 2,118
Revenue reserves 56,088 55,830 55,862
Accumulated other equity –1,273 –1,338 –1,338
Equity attributable to shareholders of BMWAG 57,591 57,268 57,300
Minority interest 580 529 529
Equity 58,171 57,797 57,829 39,016 39,778
Pension provisions 2,768 2,330 2,330 2,318 2,089 106 64
Other provisions 5,647 5,530 5,530 5,456 5,354 70 70
Deferred tax 1,900 1,762 1,773 1,057 1,016
Financial liabilities 69,998 66,744 64,772 2,434 1,017
Other liabilities 4,952 5,293 5,293 7,525 7,558 533 506
Non-current provisions and liabilities 85,265 81,659 79,698 18,790 17,034 709 640
Other provisions 7,284 5,871 5,871 6,807 5,433 108 101
Current tax 956 1,158 1,158 705 933
Financial liabilities 41,241 39,260 38,825 2,024 879
Trade payables 10,391 9,669 9,669 9,040 8,360 388 348
Other liabilities 17,442 15,826 15,826 29,740 24,639 137 187
Liabilities in conjunction with assets held for sale 64 62 62
Current provisions and liabilities 77,314 71,848 71,411 48,316 40,306 633 636
Total equity and liabilities 220,750 211,304 208,938 106,122 97,118 1,342 1,276

1 The figures to 1 January 2019 have been adjusted, based on the first-time application of IFRS 16.

2 Prior year figures adjusted due to first-time application of IFRS 16; see note 5 to the Group Financial Statements for the year ended 31 December 2018.

In addition, figures for the prior year have been adjusted due to changes in presentation of selected items, which are not material overall.

Eliminations Other Entities Financial Services
31.12. 20182 31. 3. 2019 31.12. 2018 31. 3. 2019 31.12. 20182 31. 3. 2019
Intangible assets 1 1 403 399
Property, plant and equipment 30 99
Leased products – 7,855 – 7,688 46,114 46,859
Investments accounted for using the equity method
Other investments –10,765 –10,774 6,660 6,545 1 1
Receivables from sales financing – 20 – 23 48,333 49,309
Financial assets – 39 – 65 695 858 138 134
–1,918 –1,661 28 64 485 489
– 40,610 – 39,137 33,956 34,209 2,835 3,165
Non-current assets – 61,207 – 59,348 41,340 41,677 98,339 100,455
609 665
Trade receivables 1 2 91 133
Receivables from sales financing 38,700 39,146
Financial assets – 98 –121 460 380 1,325 1,303
669 726 91 96
– 65,968 – 73,359 48,775 53,760 5,081 4,977
Cash and cash equivalents 351 255 1,985 2,539
Assets held for sale
– 66,066 – 73,480 50,256 55,123 47,882 48,859
–127,273 –132,828 91,596 96,800 146,221 149,314
Equity and liab
Subscribed capital
Accumulated other equity
Equity attributable to shareholders of BMWAG
–17,438 –17,123 20,683 20,800 14,806 15,478
Pension provisions
Other provisions
128 307 49 37
106 121
– 3,841 – 3,822 22 20 4,576 4,645
Financial liabilities – 39 – 65 44,624 47,449 19,170 20,180
– 40,272 – 38,784 1,168 837 36,333 34,841
Non-current provisions and liabilities – 44,152 – 42,671 45,942 48,613 60,234 59,824
Other provisions 9 8 328 361
17 10 208 241
Financial liabilities – 98 –121 12,339 13,347 25,705 25,991
11 11 950 952
– 65,585 – 72,913 12,595 14,011 43,990 46,467
Liabilities in conjunction with assets held for sale
Current provisions and liabilities – 65,683 – 73,034 24,971 27,387 71,181 74,012
Total equity and liabilities –127,273 –132,828 91,596 96,800 146,221 149,314

BMW Group Cash Flow Statement

BMW GROUP CASH FLOW STATEMENT

Condensed Cash Flow Statement for the period from 1 January to 31 March • 17

Group
in € million 2019 2018*
Net profit 588 2,282
Profit from discontinued operations – 44
Depreciation and amortisation of tangible, intangible and investment assets 1,440 1,233
Change in provisions 996 120
Change in leased products and receivables from sales financing – 87 – 421
Change in deferred taxes 155 277
Changes in working capital – 2,084 – 2,837
Other 209 –165
Cash inflow/outflow from operating activities 1,173 489
Total investment in intangible assets and property, plant and equipment –1,611 –1,128
Net investment in marketable securities and investment funds 45 383
Other –1,043 76
Cash inflow/outflow from investing activities – 2,609 – 669
Cash inflow/outflow from financing activities 2,808 – 270
Effect of exchange rate on cash and cash equivalents 90 –18
Effect of changes in composition of Group on cash and cash equivalents –19
Change in cash and cash equivalents 1,462 – 487
Cash and cash equivalents as at 1 January 10,979 9,039
Cash and cash equivalents as at 31 March 12,441 8,552

*Prior year figures adjusted due to first-time application of IFRS 16; see note 5 to the Group Financial Statements for the year ended 31 December 2018.

24

Financial Services Automotive
2018* 2019 2018 2019
Net profit 398 450 1,636 24
Profit from discontinued operations – 44
Depreciation and amortisation of tangible, intangible and investment assets 9 12 1,200 1,403
Change in provisions 30 38 114 1,445
Change in leased products and receivables from sales financing – 30 162
Change in deferred taxes 96 10 – 38 143
Changes in working capital 70 – 95 – 2,853 – 2,208
– 530 –1,203 1,295 1,270
Cash inflow/outflow from operating activities 43 – 626 1,354 2,033
Total investment in intangible assets and property, plant and equipment – 2 – 3 –1,112 –1,591
Net investment in marketable securities and investment funds 13 49 342 – 3
4 1 60 –1,001
Cash inflow/outflow from investing activities 15 47 – 710 – 2,595
Cash inflow/outflow from financing activities –119 1,082 –1,138 1,534
Effect of exchange rate on cash and cash equivalents –10 51 – 4 34
Effect of changes in composition of Group on cash and cash equivalents –19
Change in cash and cash equivalents – 71 554 – 517 1,006
Cash and cash equivalents as at 1 January 1,856 1,985 7,157 8,631
Cash and cash equivalents as at 31 March 1,785 2,539 6,640 9,637

OTHER INFORMATION

Page 27 Contacts

Other Information

Contacts

CONTACTS Business and Finance Press

Telephone + 49 89 382-2 45 44 + 49 89 382-2 41 18 Fax + 49 89 382-2 44 18 E-mail [email protected]

Investor Relations

Telephone + 49 89 382-2 53 87 Fax + 49 89 382-1 46 61 E-mail [email protected]

The BMW Group on the Internet

Further information about the BMW Group is available online at www.bmwgroup.com. Investor Relations information is available directly at www.bmwgroup.com/ir. Information about the various BMW Group brands is available at www.bmw.com, www.mini.com and www.rolls-roycemotorcars.com.

This version of the Quarterly Report is a translation from the German version. Only the original German version is binding.

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