The Inadequate Driving Machine


Image source: Image source: nitinut380 - Shutterstock

What's going on?

German car manufacturer BMW may have reported rising third-quarter sales on Wednesday, but the carmaker hasn’t exactly lived up to its ultimate reputation: it’s expecting a “significant decrease” in its profit for 2019 as a whole.

What does this mean?

After a series of setbacks earlier this year – both operational and regulatory – BMW reported an 8% increase in sales and an 11% jump in third-quarter profit versus a year ago. But profit for the year is down 37% so far, and between Brexit uncertainty, trade war tensions, and a global economic slowdown, the carmaker isn’t expecting any miracles this quarter either. Adding pressure to profitability is BMW’s need – whether due to regulation or competition – to invest big in electric vehicles, automated driving, and more. That might explain the $13 billion cost-cutting program it’s moving forward with, then…

Why should I care?

The bigger picture: Things are looking up.

With German carmakers like BMW struggling, it’s little wonder eurozone manufacturing activity is hovering near a seven-year low. But data released on Wednesday offers a glimmer of hope: it showed signs of life for German manufacturing, which has been the biggest contributor to the slump in the bloc’s activity. The data showed a rebound in German factory orders, with demand rising 1.3% in September – far exceeding estimates of a 0.1% gain.

Zooming out: Everyone has to leave home sometimes.

German sportswear brand Adidas also reported earnings on Wednesday, beating growth estimates for both sales and profits. The company makes more than 70% of its sales outside Europe, so it’s less exposed to the region’s weakening economy. Sales have been rising in North America, Asia Pacific, and emerging markets – and now that European sales have joined the party, growing last quarter, perhaps it’s time to start looking at the region more optimistically.

Originally posted as part of the Finimize daily email.

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