Statement by Harald Krüger, Chairman of the Board of Management of BMW AG, Conference Call Interim Report to 30 June 2016

MIL OSI – Source: BMW Group – English – Press Release/Statement

Headline: Statement by Harald Krüger, Chairman of the Board of Management of BMW AG, Conference Call Interim Report to 30 June 2016

Ladies and gentlemen,

It has been nearly five months since I presented to you the
guidelines of our Strategy Number ONE > NEXT, which form the
foundation for the future development of the BMW Group. Our goal
remains to go from the world’s leading provider of premium vehicles
and premium services to a leading mobility provider and tech company.

Our vision is clear: To be Number ONE. To inspire people on the move.
To shape tomorrow’s premium individual mobility.

The implementation of our strategy is now well underway. On the
technology side, we will be focusing on powertrain technologies and
digitalisation. On the service side, we will be selectively expanding
our customer offerings.

None of this would be possible without a strong financial base.
Profitability is a key pillar of our strategy. For the past 25
quarters, we have achieved an EBIT margin in our Automotive Segment
within our target range of 8 to 10 percent or higher. Our strategy
will maintain this focus on sustainable profitability – despite a
highly volatile environment and the constantly changing conditions we
operate in. We will continue to strive for an EBIT margin of 8 to 10
percent in the automotive segment.

This will create the right conditions: to reinforce the confidence
placed in us by our shareholders and investors over the long term, and
to be able to continue investing in our future.

We are convinced that profitable growth means much more than just
being number one in sales and volumes – especially now that players in
the premium segment are increasingly using price discounts to gain a
competitive edge.
The future viability of a company consists of various key performance
indicators. In addition to the sales figures this includes the
financial performance of the company, the strength of the brand and
innovative drive. All these indicators demonstrate the successful
long-term development of our company.

Our Strategy Number ONE > NEXT provides the BMW Group with a
framework for our actions up to 2020 and 2025.

Today, I would like to focus on two key points:
Where do we stand after the first six months of 2016?
What are we doing to implement our Strategy Number ONE > NEXT systematically?
As to the first point: In the first half of 2016, the BMW Group once
again remained the world’s leading premium car company. We delivered
more vehicles to customers worldwide than ever before during a
six-month period: more than 1.16 million vehicles – an increase of 5.8
percent over the same period of 2015. The BMW, MINI und BMW Motorrad
brands all reported new half-year highs.

Our key financials for the first six months are as follows: Earnings
before tax of 5.17 billion euros – a 6.5 percent increase year-on-year
and the highest half-year earnings in the history of the company.
Group net profit rose to almost 3.6 billion euros – another all-time
high. An EBIT margin in the Automotive Segment of 9.5 percent. This
demonstrates that: We remain on track to achieve our targets for the
2016 business year.

Our approach of balanced sales across the major regions continues to
pay off. In Europe, the BMW Group was able to make strong gains. We
also reported growth in Asia and China. As forecast, development in
China stabilised at a high level. Our sales figures for the Americas
and the United States trended lower. Estimates suggest that 17.5
million new vehicles will be registered in the US in 2016. It seems
that the US market has settled at this high level. We continue to
adapt our portfolio to the changing needs of customers in the US, who
primarily choose BMW X models.

Which leads me to a look at our model portfolio: In the first half
year of 2016, demand for our BMW X1 and BMW 2 Series models was
particularly strong. With increasing availability of all variants,
more and more customers are now buying the new BMW 7 Series. In June
alone, we sold more than 6,200 new BMW 7 Series. The first 7 Series M
Performance model will provide a further boost. The BMW M760Li xDrive
will be launched in late 2016. Additionally, our plant in Dingolfing
has been shipping the plug-in hybrid version of the BMW 7 Series since
early July. New orders for the 740e are already exceeding expectations.

In Germany, private individuals are mainly the ones taking advantage
of the incentives for electric vehicles and plug-in hybrids. Here, the
government and the automotive industry are jointly covering the cost
of the incentives. The plug-in hybrid versions of the 2 Series and 3
Series and the BMW i3 will all benefit from the purchase incentive.
I am happy to see that municipalities and institutions at the
regional and local level continue to set a good example themselves.
They are showing a growing interest in our electric-powered vehicles.

Our planned production of the iPerformance models of the BMW 740e,
BMW 330e and 225xe for this year is already sold out. We will respond
to this development. The BMW X5 PHEV is very successful in the US and
in several other European countries. Since the beginning of July, we
release our fully electric BMW i3 with 94 Ampere-hours. Our incoming
orders in Europe have increased significantly. One month after the
launch we have already received 7,158 orders for the i3 with 50
percent range increase. That is 5,190 more pre-orders than for the BMW
i3 with the first generation battery at the same time after its launch
in 2013.

This proves that when technical conditions and the right regulatory
framework are aligned, electric-powered vehicles enjoy greater
popularity. The Netherlands, for example, has been promoting
e-mobility for quite some time. In June, BMW i and iPerformance models
accounted for almost 15 percent of all BMW vehicles sold in the
Netherlands. Worldwide, we delivered more than 23,600 BMW vehicles
with an electric drive train or as PHEV in the first half of the year.
This is an increase of 87 percent compared with the first half year
2015. Through May this year BMW recorded the strongest absolute growth
in the premium segment of electric-powered vehicles.

Moreover, in this period BMW nearly doubled the dynamic growth of the
entire PHEV and BEV premium segment. Systematic electrification of our
fleet is a core tenet of our Strategy Number ONE > NEXT.

We also are working together with public partners and other
organisations in various markets to expand charging infrastructure.
This currently includes China and the US. In New Zealand we aim to
install a comprehensive network of renewable energy-powered charging
stations with local partners for BMW I vehicles.

That brings me to my second point. We have a clear objective: to be
the technology and innovation leader for individual mobility in the
digital age. To achieve this, we are establishing selected
partnerships. Together with Intel and Mobileye, we aim to develop the
technology for autonomous driving within five years. All three
partners will pool their know-how in the fields of automotive
engineering, technology, computer vision and machine learning.

With our BMW iNEXT, we aim to have a solution for highly and
fully-autonomous driving ready for series production and on the market
in 2021. For us it has always been clear: The safety of drivers,
passengers and pedestrians remains our top priority. As I stated
before, the technology for fully autonomous driving is not yet fully
mature. We will also need a clear legal framework to accompany the
introduction of this technology.

Our Strategy Number ONE > NEXT enables us to develop our own
roadmap for autonomous driving. The first step was the acquisition of
the mapping service HERE with other German premium car companies. The
second step will be the partnership with Intel and Mobileye.

Expansion of our mobility-related services is another integral part
of our strategy. Our car-sharing service DriveNow currently has more
than 650,000 members, with more than 4,700 vehicles in ten cities.
Over a quarter of the DriveNow fleet in Europe is made up of electric
vehicles. This number will continue to grow.

In the US, we have launched an enhanced car-sharing service in
Seattle under the brand ReachNow. 500 BMW and MINI cars are currently
available. An additional 20 percent of the fleet is made up of BMW
i3s. We plan to expand ReachNow to other cities in the United States.

Ladies and Gentlemen,

As you can see, there are many different fields of activity and
business opportunities we are intensively pursuing. Our Strategy
provides the guidelines to keep us on course in volatile times and
offset future uncertainties in our business environment. These future
technologies and new services naturally require a high level of
investment. We will continue to draw on our own resources to achieve this.

For me, there is no “either/or” between the present and the future:
The strength of our core business today is the foundation of our
future success. All three of our brands have an attractive line-up,
with tremendous technological diversity. Additionally, the global
automotive market should continue to grow in 2016. All these factors
make us optimistic for the business year 2016.

Our performance targets remain unchanged: A slight increase in
automotive sales – to achieve another all-time high. A slight increase
in earnings before tax – which would be another best for the company.
And an EBIT margin in the automotive segment within our target range
of eight to ten percent.

This guidance assumes, as always, that political and business
conditions remain stable. However, we are all currently experiencing
just how quickly and fundamentally things can change. Economic growth
and political stability in the world certainly cannot be taken for granted.

With our BMW, MINI and Rolls-Royce Vision Vehicles, the BMW Group has
sent a clear message: We are shaping the mobility of the present and
the future. Our centenary celebration tour “The NEXT 100 YEARS” will
conclude in Los Angeles after having been in Munich, Beijing and
London. In October I look forward to presenting our VISION 100 vehicle
for Motorrad. It would be great to see you there and to offer you a
full picture of the BMW Group’s vision of the future.

Thank you for your attention.