A N N U A L R E P O R T 2 0 1 8
# Milestones
in Future Mobility
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We are inventing the mobility of the future,
in which we think and work in new ways.
We invite you to learn more about how we
see the future today.
4
CORPORATE
GOVERNANCE
Page 200 Statement on Corporate Governance
(Part of the Combined Management Report)
Information on the Company’s Governing Constitution
Page 200
Page 201 Declaration of the Board of Management and of the
Supervisory Board Pursuant to § 161 AktG
Page 202 Members of the Board of Management
Page 203 Members of the Supervisory Board
Page 206 Composition and Work Procedures of the Board of
Management of BMW AG and its Committees
Page 208 Composition and Work Procedures of the
Super visory Board of BMW AG and its Committees
Page 215 Disclosures Pursuant to the Act on Equal
Page 216
Gender Participation
Information on Corporate Governance Practices Applied
beyond Mandatory Requirements
Page 218 Compliance in the BMW Group
Page 223 Compensation Report
(Part of the Combined Management Report)
Page 239 Responsibility Statement by the
Company’s Legal Representatives
Page 240 Independent Auditor’s Report
5
OTHER INFORMATION
Page 248 BMW Group Ten-year Comparison
Page 250 Glossary – Explanation of Key Figures
Page 252 Index
Page 254 Index of Graphs
Page 255 Financial Calendar
Page 256 Contacts
CONTENTS
1
TO OUR SHAREHOLDERS
Page
4 BMW Group in Figures
Page
8 Report of the Supervisory Board
Page 16 Statement of the Chairman of the
Board of Management
Page 20 BMW AG Stock and Capital Markets in 2018
2
COMBINED
MANAGEMENT REPORT
Page 26 General Information and Group Profile
Page 26 Organisation and Business Model
Page 36 Management System
Page 40 Report on Economic Position
Page 40 General and Sector-specific Environment
Page 44 Overall Assessment by Management
Comparison of Forecasts for 2018 with Actual Results in 2018
Page 45
Page 48 Review of Operations
Page 65 Results of Operations, Financial Position and Net Assets
Page 80 Comments on Financial Statements of BMW AG
Page 84 Report on Outlook, Risks and Opportunities
Page 84 Outlook
Page 90 Risks and Opportunities
Page 103 Internal Control System Relevant for Accounting and
Financial Reporting Processes
Page 104 Disclosures Relevant for Takeovers and
Explanatory Comments
3
GROUP FINANCIAL
STATEMENTS
Page 110 Income Statement
Page 110 Statement of Comprehensive Income
Page 112 Balance Sheet
Page 114 Cash Flow Statement
Page 116 Statement of Changes in Equity
Page 118 Notes to the Group Financial Statements
Page 118 Accounting Principles and Policies
Page 139 Notes to the Income Statement
Page 145 Notes to the Statement of Comprehensive Income
Page 146 Notes to the Balance Sheet
Page 167 Other Disclosures
Page 184 Segment Information
Page 190 List of Investments at 31 December 2018
MILESTONES
IN FUTURE MOBILITY
Our Annual Report is also available
in digital form under:
www.annual-report2018.bmwgroup.com
The figures for fuel consumption, CO2 emissions and power consumption are calculated
based on the measurement methods stipulated in the current version of Regulation
(EU) 715 / 2007. This information is based on a vehicle with basic equipment in Germany;
ranges take into account differences in wheel and tire size selected as well as optional
equipment and can change based on configuration. Fuel consumption and CO2 emissions
information are available on page 108.
The figures have been calculated based on the new WLTP test cycle and adapted to NEDC
for comparison purposes. In these vehicles, different figures than those published here may
apply for the assessment of taxes and other vehicle-related duties which are (also) based
on CO2-emissions. These figures are provisional.
For further details of the official fuel consumption figures and official specific CO2 emissions
of new cars, please refer to the “Manual on fuel consumption, CO2 emissions and power
consumption of new cars”, available at www.dat.de /co2 /.
1
To Our
Shareholders
BMW Group in
Figures
Report of the
Supervisory Board
Statement of
the Chairman of
the Board of
Management
BMW AG Stock and
Capital Markets
TO OUR SHAREHOLDERS
Page 4 BMW Group in Figures
Page 8 Report of the Supervisory Board
Page 16 Statement of the Chairman of the Board of Management
Page 20 BMW AG Stock and Capital Markets in 2018
1
4
BMW Group
in Figures
BMW GROUP IN FIGURES
Key non-financial performance indicators
• 01
Group
Workforce at year-end 1
Automotive seGment
Deliveries 2
Fleet emissions in g CO2 / km 3
motorcycles seGment
Deliveries
2014
2015
2016
2017
2018
Change in %
116,324
122,244
124,729
129,932
134,682
2,117,965
2,247,485
2,367,603
2,463,526
2,490,664
130
127
124
128 4
128
123,495
136,963
145,032
164,153
165,566
3.7
1.1
–
0.9
Further non-financial performance figures
• 02
Automotive seGment
Deliveries
BMW 2
MINI
Rolls-Royce
Total 2
Production volume
BMW 5
MINI
Rolls-Royce
Total 5
motorcycles seGment
Production volume
BMW
FinAnciAl services seGment
2014
2015
2016
2017
2018
Change in %
1,811,719
1,905,234
2,003,359
2,088,283
2,125,026
302,183
4,063
338,466
3,785
360,233
4,011
371,881
3,362
361,531
4,107
2,117,965
2,247,485
2,367,603
2,463,526
2,490,664
1,838,268
1,933,647
2,002,997
2,123,947
2,168,496
322,803
4,495
342,008
3,848
352,580
4,179
378,486
3,308
368,685
4,353
2,165,566
2,279,503
2,359,756
2,505,741
2,541,534
1.8
– 2.8
22.2
1.1
2.1
– 2.6
31.6
1.4
133,615
151,004
145,555
185,682
162,687
– 12.4
New contracts with retail customers
1,509,113
1,655,961
1,811,157
1,828,604
1,908,640
4.4
1 Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners.
2 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2014: 275,891 units, 2015: 282,000 units, 2016: 316,200 units, 2017: 384,124 units, 2018: 459,581 units).
3 EU-28.
4 Adjusted value based on planned conversion to WLTP (Worldwide Harmonised Light Vehicles Test Procedure).
5 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2014: 287,466 units, 2015: 287,755 units, 2016: 305,726 units, 2017: 396,749 units, 2018: 491,872 units).
To Our Shareholders 5
Key financial performance indicators
• 03
Group
Profit before tax 1 in € million
Automotive seGment
Revenues 1 in € million
EBIT margin 1 in % (change in %pts)
RoCE 1 in % (change in %pts)
motorcycles seGment
EBIT margin 1 in % (change in %pts)
RoCE 1 in % (change in %pts)
FinAnciAl services seGment
RoE in % (change in %pts)
2014
2015
2016
2017
2018
Change in %
8,707
9,224
9,665
10,675
9,815
– 8.1
75,173
85,536
86,424
85,742
85,846
9.6
61.7
6.7
21.8
9.2
72.2
9.1
31.6
8.9
74.3
9.0
33.0
9.2
77.7
9.1
34.0
7.2
49.8
8.1
28.4
0.1
– 2.0
– 27.9
– 1.0
– 5.6
19.4
20.2
21.2
18.1
14.8
– 3.3
Further financial performance figures
• 04
in € million
2014
2015
2016
2017
2018
Change in %
Total capital expenditure 2
Depreciation and amortisation
Free cash flow Automotive segment
Group revenues 1
Automotive 1
Motorcycles 1
Financial Services
Other Entities
Eliminations 1
Group profit before financial result (EBIT) 1
Automotive 1
Motorcycles 1
Financial Services
Other Entities
Eliminations 1
Group profit before tax (EBT) 1
Automotive 1
Motorcycles 1
Financial Services
Other Entities
Eliminations 1
Group income taxes 1
Profit from continuing operations
Loss from discontinued operations
Group net profit 1
Earnings per share 1 in €
6,100
4,170
3,481
80,401
75,173
1,679
20,599
7
5,890
4,659
5,404
92,175
85,536
1,990
23,739
7
5,823
4,806
5,792
94,163
86,424
2,069
25,681
6
7,112
4,822
4,459
98,282
85,742
2,272
27,567
7
8,013
5,113
2,713
97,480
85,846
2,173
28,165
6
– 17,057
– 19,097
– 20,017
– 17,306
– 18,710
9,118
7,244
112
1,756
71
– 65
8,707
6,886
107
1,723
154
– 163
– 2,890
5,817
–
5,817
9,593
7,836
182
1,981
169
– 575
9,224
7,523
179
1,975
211
– 664
– 2,828
6,396
–
6,396
9,386
7,695
187
2,184
– 17
– 663
9,665
7,916
185
2,166
170
– 772
– 2,755
6,910
–
6,910
9,899
7,888
207
2,194
14
– 404
10,675
8,717
205
2,207
80
– 534
– 2,000
8,675
–
8,675
9,121
6,182
175
2,190
– 27
601
9,815
6,977
169
2,161
– 45
553
– 2,575
7,240
– 33
7,207
12.7
6.0
– 39.2
– 0.8
0.1
– 4.4
2.2
– 14.3
– 8.1
– 7.9
– 21.6
– 15.5
– 0.2
–
–
– 8.1
– 20.0
– 17.6
– 2.1
–
–
– 28.8
– 16.5
–
– 16.9
8.83 / 8.85
9.70 / 9.72
10.45 / 10.47
13.07 / 13.09
10.82 / 10.84
– 17.2 / – 17.2
Pre-tax return on sales 1, 3 in % (change in %pts)
10.8
10.0
10.3
10.9
10.1
– 0.8
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 Expenditure for capitalised development costs, other intangible assets and property, plant and equipment.
3 Group profit before tax as a percentage of Group revenues.
6
BMW Group
in Figures
BMW Group deliveries of automobiles 1
• 05
BMW Group revenues
• 07
in 1,000 units
in € billion
2,500
2,247.5
2,118.0
2,367.6 2,463.5 2,490.7
1,250
0
100
50
0
92.2
94.2
98.3
97.5
80.4
2014
2015
2016
2017
2018
2014
2015
2016
2017 2
2018
1 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang
(2014: 275,891 units, 2015: 282,000 units, 2016: 316,200 units, 2017: 384,124 units,
2018: 459,581 units).
BMW Group profit before financial result (EBIT)
• 06
BMW Group profit before tax
• 08
in € million
in € million
11,000
9,118
9,593
9,386
9,899
9,121
11,000
9,224
9,665
8,707
10,675
9,815
5,500
0
5,500
0
2014
2015
2016
2017 2
2018
2014
2015
2016
2017 2
2018
2 Prior year figures adjusted due to first-time application of IFRS 15,
see note 6 to the Group Financial Statements.
To Our Shareholders REPORT OF THE
SUPERVISORY BOARD
STATEMENT OF THE
CHAIRMAN OF THE
BOARD OF MANAGEMENT
BMW AG STOCK AND
CAPITAL MARKETS IN 2018
1
To Our
Shareholders
BMW Group in
Figures
Report of the
Supervisory Board
Statement of
the Chairman of
the Board of
Management
BMW AG Stock and
Capital Markets
8
Report of the
Supervisory Board
Norbert Reithofer
Chairman of the Supervisory Board
To Our Shareholders Dear Shareholders,
9
In the course of 2018, our company had to tackle a variety of challenges within its business
environment. However, we were able to master them and achieve a good result, despite the adversities.
At the same time, the Group is systematically laying the foundations for long-term success going
forward. The continuous expansion of our range of electrified vehicles is one good example of this
strategy. Particularly in these times of fundamental change, the BMW Group maintains a leading
position in the automotive industry, shaping technological transformation with determination,
passion and professional excellence.
Monitoring and advisory activities of the Supervisory Board
In our capacity as Supervisory Board, we provided the Board of Management with in-depth advice
on matters relating to the management and further development of the BMW Group and monitored
the Board of Management’s running of the business, both continuously and thoroughly. The full
Supervisory Board met five times in the course of the year, including one two-day meeting, and on
each occasion deliberated in detail with the Board of Management on the Group’s performance. In
addition to these meetings, the Board of Management provided us with information on matters of
particular significance. Furthermore, the Chairman of the Supervisory Board was in frequent contact
with the Chairman of the Board of Management, as was the Chairman of the Audit Committee with
the Chief Financial Officer, in order to deal with current topics as they arose.
The Chairman of the Supervisory Board also held individual discussions with representatives of
various investors as well as with a shareholders’ association. Topics of these consultations included
the treatment of strategy by the Supervisory Board, the involvement of the Supervisory Board in
sustainability issues and the new compensation system for the Board of Management.
The work of the Supervisory Board focused in particular on the strategic development of the
BMW Group’s business models against the backdrop of digitalisation, drivetrain electrification
and other key trends. We also debated exhaustively on the challenges posed by trade conflicts,
the imminent Brexit crisis and supply distortions resulting from the difficulties encountered by
some of our competitors in converting to the new European WLTP testing cycle.
In its regular reports on the BMW Group’s current situation, the Board of Management provided us
with information about new vehicle models, delivery volume trends and market developments in the
Automotive and Motorcycles segments as well as new and total business volumes in the Financial
Services segment, in each case highlighting any planning variances. The Board of Management
also presented us with the latest workforce figures and reported on economic developments in
key markets.
The status reports also included information on other current transactions and projects of key
importance, which the Supervisory Board considered in detail. These topics included important
cooperation projects such as the joint venture with Great Wall Motor, in particular regarding the
production of all-electric MINI vehicles in China, the joint venture with Daimler in the field of
mobility services and collaboration in the field of autonomous driving. The Supervisory Board also
discussed the possible introduction of driving bans for certain diesel-powered vehicles in individual
cities in Europe and the future prospects of diesel engines in general. Furthermore, the Board of
Management reported on the temporary market disruptions caused by discount campaigns initiated
by competitors in the run-up to the introduction of the new WLTP measurement procedures.
It informed the Supervisory Board about the increased extent of statutory and non-statutory warranty
measures as well as major vehicle recalls. International trade conflicts, trade risks and their impact
on the BMW Group were repeatedly the subject of the status reports provided.
10
Report of the
Supervisory Board
In addition to the status reports, the Supervisory Board focused on a number of specific areas
in greater detail. For example, the Board of Management reported on the current status and
strategy of Group financing. Further topics focused on were market developments and business
performance in North America, in the course of which trade risks and financial challenges in
the region were also addressed. Moreover, the Board of Management reported in detail on the
current status of and the overall strategy regarding the BMW brand.
The Supervisory Board discussed the current situation and strategy regarding the Group’s
direct operations and joint ventures in China. In particular, the Board of Management
described its plans to expand local production through the BMW Brilliance Automotive Ltd.
joint venture (BBA) and its intention to increase its stake in BBA. The Supervisory Board
supports the Board of Management’s strategically significant plan to increase the BMW Group’s
stake in BBA’s share capital by 25 percentage points to 75 % by 2022 and gave its approval
for the transaction.
The Board of Management explained the current status of the customer ecosystem to the
Supervisory Board and provided an outlook on the further development of the Digital Services
and Mobility Services business fields. In the process, questions of data sovereignty and data
security regarding data collected within the Group’s vehicles were also a topic of debate.
Furthermore, the Supervisory Board discussed the Group’s global added value strategy across
the production network and the criteria influencing the decision to locate the planned new
production site in Eastern Europe.
The Supervisory Board held lengthy discussions with the Board of Management regarding
the current status of the Strategy NUMBER ONE > NEXT and the decisions taken in previous
months to implement it. In particular, the Board of Management discussed recent changes in
the market environment (such as customs duty increases, restrictive trade policies and Brexit
scenarios) and explained how the current strategy enables the BMW Group to respond to the
respective challenges. Among other matters, strategies regarding the electrification of the product
range, drivetrain technology and digitalisation as well as autonomous driving were presented
in detail. The Supervisory Board emphatically supports the continued implementation of the
Strategy NUMBER ONE > NEXT.
We also deliberated intensively on the BMW Group’s forecasts for the period from 2019 to 2024.
In this context, the Board of Management addressed the volatile nature of global economic
and political conditions and their influence on planning. Risk scenarios and their possible
effects on long-term planning were also presented. After thorough review, the Supervisory
Board approved the BMW Group’s long-term corporate plan. Based on this plan, the Board of
Management presented the annual budget for the financial year 2019, which we also discussed
at great length.
We also gave lengthy consideration to the business performance, risk situation and strategy of
the Financial Services segment. The strategy for the further development of the MINI brand and
cooperation with the Chinese company Great Wall Motor in this respect were also the subject
of our deliberations. In addition, the Board of Management reported on the current status of
diversity concepts for the Company.
The Supervisory Board examined the structure and the level of compensation paid to the
members of the Board of Management. In this context, we took into account trends in business
performance, executive manager compensation and the remuneration of the workforce in
Germany over time. Based on comparative studies conducted by an external compensation
consultant, we concluded that the compensation of the members of the Board of Management
is commensurate. Detailed information on the compensation of Board of Management members
is provided in the Compensation Report.
To Our Shareholders 11
The new compensation system in place since the beginning of 2018 was approved by the
Annual General Meeting in May 2018. The structure of compensation systems for members of
the Board of Management and reporting thereon is currently the subject of draft amendments
to the German Stock Corporation Act and the German Corporate Governance Code. For
this reason, we have decided not to make any changes to the compensation system for the
BMW Group’s Board of Management decided on as recently as 2017, but to await the results of
the above-mentioned reforms.
We also discussed corporate governance within the BMW Group and the application of the
recommendations contained in the German Corporate Governance Code. In December, the
Board of Management and the Supervisory Board issued their Declaration of Compliance with
the German Corporate Governance Code. We comply with all of the recommendations of
the current version of the Code with only one exception (the use of model tables for Board of
Management compensation). The wording of the Declaration of Compliance is shown in the
Corporate Governance Report.
We also reviewed existing targets for the composition of the Supervisory Board and the competence
profile set out for its members. We concluded that the composition of the Supervisory Board at
31 December 2018 was in line with the targets stipulated in the diversity concept, the competency
profile and other composition targets. We have decided to continue using the competency profile
and the targets for the composition of the Supervisory Board for the financial year 2019.
No conflicts of interest arose on the part of members of the Supervisory Board during the year
under report. Significant transactions with Supervisory Board members and other related
parties as defined by IAS 24, including close relatives and intermediary entities, are examined
on a quarterly basis.
We reviewed the efficiency of our work in the Supervisory Board, having prepared the related
discussion at the full Supervisory Board meeting on the basis of a questionnaire. Overall, the work
of the Supervisory Board was deemed efficient. No significant need for change was identified.
Average attendance at the five Supervisory Board meetings was 94 %. An individualised overview
of attendance at meetings of the Supervisory Board and its committees for the financial year
2018 has been published on the BMW Group’s website. All members of the Supervisory Board
attended more than half of the meetings of the Supervisory Board and those committees to
which they belonged during their term of office in the financial year 2018.
Description of Presiding Board activities and committee work
The Supervisory Board has established a Presiding Board and four committees. Committee
chairpersons reported in detail on Presiding Board and committee work at the subsequent
meetings of the full Supervisory Board. A detailed description of the duties, composition and
working procedures of the Presiding Board and the committees is provided in the Corporate
Governance Report.
The Presiding Board convened four times during the year under report. Assuming no committee
was responsible, the focus of our activities was on preparing the detailed agenda for the meetings
of the full Supervisory Board. Together with the Board of Management and senior heads of
department, we prepared the various items on the agenda for Supervisory Board meetings in a
thorough manner and made suggestions for reports to be submitted to the full Supervisory Board.
The Audit Committee held five meetings and three telephone conference calls during the financial
year 2018. In the course of those conference calls, together with the Board of Management we
examined and discussed the Quarterly Financial Reports prior to their publication. Representatives
of the external auditors were present when discussing the Half-Year Financial Report.
12
Report of the
Supervisory Board
The meeting of the Audit Committee held in February 2018 focused primarily on preparing for
the Supervisory Board meeting at which the financial statements were to be examined. Before
recommending to the full Supervisory Board that KPMG AG Wirtschaftsprüfungsgesellschaft
(KPMG) be re-elected as Company and Group auditor at the Annual General Meeting 2018,
the Audit Committee obtained a Declaration of Independence from KPMG and, in this context,
also considered the scope of non-audit services provided by KPMG entities to the BMW Group.
There were no indications of conflicts of interest, grounds for exclusion or lack of independence
on the part of the auditor.
The fees proposed by KPMG for the audits of the year-end Company and Group Financial
Statements 2018 and for the review of the Half-Year Financial Report were deemed appropriate.
Subsequent to the Annual General Meeting held in May 2018, the Audit Committee therefore
appointed KPMG for the relevant engagements and specified audit focus areas.
During the year under report, the Audit Committee again dealt intensively with the topic
of compliance in the BMW Group. In his regular report, the Chairman of the Compliance
Committee provided us with a summary of ongoing compliance-related proceedings. He also
explained the results of a voluntary external audit of the BMW Group’s compliance management
system in the context of antitrust law with the aim of verifying its appropriateness. On this
basis, the Compliance Committee submitted a concept to develop the Compliance Management
System, which was confirmed by the Board of Management. The Audit Committee discussed
the concept at length and supports the corresponding further development of the Compliance
Management System.
The Committee received continuous and detailed information on the status of the internal
investigations and the EU Commission’s investigation into the antitrust allegations in connection
with the former working groups of several German automobile manufacturers. A representative
of the law firm engaged by the company also regularly took part in the discussions.
The Board of Management reported to the Audit Committee on engine control software for certain
earlier model versions of two vehicle types, which, in the BMW Group’s opinion, was originally
developed correctly, but later fitted with a software module not intended for this type of vehicle.
The BMW Group attributes the software error to a manual, human error in an update and not
to a deliberate manipulation of the engine control and exhaust gas cleaning systems. The Board
of Management also explained this process at the Annual General Meeting in 2018. The Public
Prosecution Office Munich delivered a decision on 25 February 2019 regarding notice of a fine
of € 8.5 million due to a minor offence. The investigation of the Public Prosecution Office found
no evidence of use of a deactivation device in emissions testing, fraud, or deliberate statutory
violations. The Company has accepted the penalty.
Furthermore, the Audit Committee dealt with the main results of the audits conducted by
Group Internal Audit and with further audit planning. The Audit Committee also discussed risk
management and the assessment of current risks. Other topics included the internal control
system, export control and the report on major legal disputes.
The Audit Committee continued to make preparations for the change in external auditor for the
financial year 2019 in line with plan. It also regularly examined the non-audit services provided
by the current auditor. An independent auditor engaged to conduct the mandatory audit of
over-the-counter derivative transactions confirmed the effectiveness of the system that BMW AG
currently employs to ensure compliance with regulatory requirements.
To Our Shareholders 13
The Audit Committee concurred with the decision of the Board of Management to raise the Com-
pany’s share capital in accordance with Article 4 (5) of the Articles of Incorporation (Authorised
Capital 2014) by € 521,500 and, in conjunction with the Employee Share Programme, to issue a
corresponding number of new non-voting bearer shares of preferred stock.
The Personnel Committee convened four times during the financial year 2018 and held two
telephone conferences. In particular, it dealt with the change in the Board of Management for
the Purchasing and Supplier Network and prepared the relevant decisions of the Supervisory
Board. The Personnel Committee also discussed issues relating to the compensation of the
Board of Management and gave members of the Board of Management their approval to accept
mandates outside the Group in a number of cases.
The Nomination Committee convened twice during the financial year 2018. At those meetings, we
deliberated on succession planning for shareholder representatives and made recommendations
for proposed nominations of candidates for election to the Supervisory Board at the Annual
General Meetings 2018 and 2019, taking into account the composition targets previously decided
upon by the Supervisory Board.
The Mediation Committee, which is prescribed by law, did not need to convene during the
financial year 2018.
Composition of the Board of Management
Pieter Nota was appointed to the Board of Management with effect from 1 January 2018. He
succeeded Dr Ian Robertson as member of the Board of Management responsible for Sales and
Brand BMW, Aftersales BMW Group.
On 24 July 2018, the Supervisory Board resolved to revoke the appointment of Markus Duesmann
as a member of the Board of Management and release him from his duties for the remaining
term of his contract. Mr Duesmann had previously informed the Chairman of the Supervisory
Board of his intention to move to the management board of a competitor. The Purchasing and
Supplier Network headed by Mr Duesmann was temporarily taken over by Oliver Zipse, member
of the Board of Management responsible for Production. With effect from 1 October 2018, the
Supervisory Board appointed Dr Andreas Wendt to the Board of Management as member with
responsibility for Purchasing and Supplier Network. Previously, he was head of the largest
German BMW Group plant in Dingolfing.
Composition of the Supervisory Board,
the Presiding Board and the Supervisory Board’s committees
Dr Robert Lane resigned from the Supervisory Board with effect from the end of the Annual
General Meeting 2018. He resigned his mandate in mutual agreement with the Company. We
wish to thank Dr Lane for his valuable contributions and steadfast cooperation during his nine
years on the Supervisory Board. The Annual General Meeting elected the former Chairman of
the Board of Management of BASF SE, Dr Kurt Bock, as new member of the Supervisory Board.
The Supervisory Board members Professor Reinhard Hüttl, Dr Karl-Ludwig Kley and Professor
Dr Renate Köcher were re-elected as members of the Supervisory Board.
The composition of the Presiding Board and the committees of the Supervisory Board remained
unchanged during the financial year. The Corporate Governance Report contains a summary
of the composition of the Supervisory Board and its committees.
14
Report of the
Supervisory Board
Examination of financial statements and the profit distribution proposal
The Company and Group Financial Statements of the Company for the financial year 2018 were
audited by KPMG AG Wirtschaftsprüfungsgesellschaft. KPMG also conducted a review of the
abridged Interim Group Financial Statements and Interim Group Management Report for the
six-month period ended 30 June 2018. The results of the review were presented to the Audit
Committee by representatives of KPMG AG. No issues were identified that might indicate that
the abridged Interim Group Financial Statements and Interim Group Management Report had
not been prepared in all material respects in accordance with the applicable provisions.
The Group and Company Financial Statements for the year ended 31 December 2018 and the
Combined Management Report – as authorised for issue by the Board of Management on
19 February 2019 – were audited by KPMG AG and given an unqualified audit opinion.
The Auditor’s Report has been signed since the financial year 2016 by Christian Sailer, as
independent auditor (Wirtschaftsprüfer), and since the financial year 2014 by Andreas Feege,
as independent auditor (Wirtschaftsprüfer) responsible for the performance of the engagement.
The financial statements for the financial year 2018, the Combined Management Report, the
reports of the external auditors and the Board of Management’s profit distribution proposal
were made available to all members of the Supervisory Board in a timely manner.
The Audit Committee carefully examined and discussed these documents at its meeting held
on 27 February 2019. The Audit Committee reviewed in detail the key audit matters raised in
the auditor’s report of the Company and Group Financial Statements and the related audit
procedures performed by the independent auditor.
At its meeting held on 15 March 2019, the full Supervisory Board discussed in depth the draft
of the Company and Group Financial Statements submitted by the Board of Management. In
both meetings, the Board of Management gave a detailed explanation of the financial reports it
had prepared. Representatives of the external auditor were also present at both meetings. They
reported on the main findings of their audit, explained the key audit matters in the audits of
the Company and Group Financial Statements and answered additional questions of members
of the Supervisory Board.
The representatives of the external auditor confirmed that the risk management system estab-
lished by the Board of Management is capable of identifying at an early stage any developments
that might threaten the Company’s going-concern status. They confirmed that no material
weaknesses in the internal control system and risk management system with regard to the
financial reporting process were identified. Similarly, they did not identify in the course of their
audit work any facts that were inconsistent with the contents of the Declaration of Compliance
pursuant to Section 161 of the German Stock Corporation Act (AktG) issued by the Board of
Management and the Supervisory Board.
Based on a thorough examination conducted by the Audit Committee and the full Supervisory
Board, we concurred with the results of the external audit. In accordance with the conclusion
reached after the examination by the Audit Committee and the Supervisory Board, no objections
were raised. The Group and Company Financial Statements of BMW AG for the financial year
2018 prepared by the Board of Management were approved at the Supervisory Board meeting
held on 15 March 2019. The financial statements have therefore been adopted.
The Supervisory Board also examined the proposal of the Board of Management to use the
unappropriated profit to pay a dividend of € 3.50 per share of common stock and € 3.52 per
share of non-voting preferred stock. We consider the proposal appropriate and have therefore
approved it.
To Our Shareholders 15
Furthermore, in conjunction with the presentation of the Sustainable Value Report, the
Audit Committee and the Supervisory Board reviewed the separate non-financial report of
BMW AG (Company and Group) at 31 December 2018, which has been drawn up by the Board
of Management. The audit firm PricewaterhouseCoopers GmbH has performed a “limited
assurance” review of these reports and issued an unqualified statement thereon. The documents
were carefully examined by the Audit Committee at its meeting on 27 February 2019 and by the
Supervisory Board at its meeting on 15 March 2019. The Board of Management provided an
in-depth explanation of the reports at both meetings. Representatives of the auditors attended
both meetings, reported on significant findings and answered additional questions raised by
members of the Supervisory Board. The Supervisory Board acknowledged and approved the
separate non-financial report (Company and Group) drawn up by the Management Board.
Expression of appreciation by the Supervisory Board
We wish to express our appreciation to the members of the Board of Management and the entire
workforce of the BMW Group worldwide for their dedication, their ideas and their achievements
during the financial year 2018, which form the bedrock of the enduring success and sustainability
of our Company – both now and in the future.
Munich, 15 March 2019
On behalf of the Supervisory Board
Norbert Reithofer
Chairman of the Supervisory Board
16
Statement of the
Chairman
of the Board of
Management
Harald Krüger
Chairman of the Board of Management
To Our Shareholders Dear Shareholders,
17
On behalf of the Board of Management and our nearly 135,000 associates worldwide, I would
like to thank you for joining the BMW Group on its journey into the future.
Tech company in the premium mobility sector
Individual mobility, in all its facets, remains our core competence. We are reminded, time and
again, that long-term success demands fresh thinking and bold action.
Digitalisation is changing every industry and every aspect of our lives. We have set ourselves a
clear goal: to be a leading tech company for premium mobility by 2025 – and we are developing
our business model in this direction. Our Strategy NUMBER ONE > NEXT has three main
approaches: profitability, growth and future – all of them geared towards our customers’
ever-evolving needs and desires.
iNEXT – a building block for the future
We are moving autonomous driving forward with a combination of enthusiasm and sound
judgement. Safety is for us an absolute priority in this area. In 2021, we will release the
BMW iNEXT, a vehicle that brings together several future technologies: a futuristic interior, full
connectivity and an electric range of up to 700 km. This marks the beginning of highly automated
driving. At the same time, we are also testing autonomous driving with a fleet of 500 iNEXT
vehicles in urban settings.
Mobility services from a single source
We are creating new mobility offerings and digital services that will enable customers to bring
their digital world into the car. Combining our mobility services in a joint venture with the
Daimler Group will allow us to offer customers a single source for all their mobility needs with
a single touch.
Uncertainty is part of our business
2018 was a challenging year for our industry, due to trade conflicts and the uncertainty
surrounding Brexit: vehicle sales declined across the globe for the first time since the global
economic and financial crisis.
Volatile markets, tough competition and various operating conditions in different countries
are all part of our business. The BMW Group has had to overcome difficult hurdles many
times in its history. In such moments, we have always stayed the course with a steady hand
at the wheel.
WLTP systematically implemented
A current example of this is the switch to the new WLTP test procedure in Germany and Europe.
We implemented the new requirements in our vehicles systematically and early. That is how we
operate as a company. We will also continue to meet ambitious targets to reduce CO2 emissions
in Europe and the rest of the world.
18
Statement of the
Chairman
of the Board of
Management
Eighth consecutive sales record
Because customers around the world value our cars and motorcycles so much, the BMW Group
was able to post record sales for the eighth consecutive year. The BMW Group has been number
one in the global premium segment for the past 15 years. Our brands BMW, Rolls-Royce and
BMW Motorrad achieved new all-time highs, while MINI reported its second-highest sales
result ever.
For the first time, BMW M GmbH broke through the 100,000 unit sales mark with its M and
M Performance models.
Despite tough headwinds, second-best result in our history
Group earnings before tax and annual net profit were both the second-highest in our history. As
previously announced, earnings before tax were moderately lower than last year’s record figure.
With an EBIT margin of 7.2 percent in the Automotive segment, we exceeded our adjusted target.
This figure only partially includes our China business, as is usual. The Group EBT margin of
10.1 percent was above our 10 percent target for the eighth consecutive year. Once again, our
financial services business made a significant contribution to the Group result.
Dear Shareholders, your company is on a very solid footing and possesses considerable financial
strength. This means we can continue to invest in new technologies, services and our locations
as our springboard to the future.
Systematic electrification for emissions-free driving
The future belongs to electric mobility – there is no doubt in my mind about that. But it’s certainly
not a sprint, it’s a marathon. By late 2019, we aim to have half a million electrified BMW Group
vehicles on the roads.
The trend is clear: in Europe, no other manufacturer sells more electrified vehicles than the
BMW Group. Between 2015 and 2018, sales of our electric models and plug-in hybrids increased
more than fourfold.
We are also number one worldwide in registrations of plug-in hybrid vehicles. This technology
not only gives our customers access to electric driving, it is also a quick and pragmatic way to
improve air quality in cities. Studies show that plug-in hybrids with an electric range of at least
60 km are driven in electric mode just as often as pure-electric models.
And there’s more coming on the electric side: 2019 will bring plug-in hybrid variants of the
new BMW 3 Series, X5 and 7 Series. The X3 will also be available for the first time with a hybrid
drive train. These will be joined by the first fully electric MINI and, in 2020, by the first fully
electric BMW – the iX3.
By the end of 2020, we will have more than ten new and revised models with an electrified
drive train. Thanks to flexible vehicle architectures, our plants will be able to build different
drive types.
The heart of an electric vehicle is the electric motor and the battery. We produce both the
electric drive and the high-voltage battery in-house. In the summer, we will open the new
BMW Group Battery Cell Competence Centre in Munich, where we will develop so-called
build-to-print prototypes. For production of base cells, we will be working with the world’s
largest manufacturer of automotive battery cells, CATL, from China, and with Northvolt in
a European consortium.
To Our Shareholders 19
Dear Shareholders,
Your Company is innovative, profitable and versatile. This year, the Board of Management
and Supervisory Board will propose a dividend of 3.50 euros per share of common stock and
3.52 euros per share of preferred stock. This is the second-highest dividend the company has
ever paid in its history. BMW AG associates in Germany will also benefit from the company’s
positive performance through our profit-sharing programme.
The current business and political environment remains complex and challenging, overshadowed
by uncertainty. That is not going to change any time soon. But we do not shy away from such
challenges. This is what spurs us to give our best and search for new and innovative solutions.
It also applies in our competition with both new and established companies.
At the BMW Group, we continue to navigate our own course. Our aim remains to be both a
driving force and an innovator, able to lead individual mobility into a new era for our customers:
one that is sustainable, connected and autonomous.
Above all, we are committed to focusing all our efforts on bringing the EBIT margin in the
Automotive segment back within our target range of 8 to 10 percent.
We aim to ensure that your Company remains an attractive investment as we move towards
the future.
Harald Krüger
Chairman of the Board of Management
20
BMW AG Stock and
Capital Markets
in 2018
BMW AG STOCK
AND CAPITAL
MARKETS
IN 2018
Political uncertainties unsettle
capital markets
BMW AG stock outperforms sector
Ratings remain at top level
www.bmwgroup.com / ir
Numerous political uncertainties unsettled capital mar-
kets over the course of 2018 and dampened the mood
on stock markets. In particular, global trade disputes
and political uncertainties in Europe dominated stock
market developments and negatively impacted investor
sentiment. Since the introduction of higher customs
tariffs on goods traded between China and the USA on
6 July 2018, the American-Chinese trade dispute had a
particularly negative effect on global stock exchanges
and therefore also on auto stocks worldwide.
Development of BMW AG stock compared to
stock market indices since 30 December 2013
• 09
100.0
83.0
88.1
110.5
in %
120
60
0
BMW
preferred
stock
BMW
common
stock
Prime
Auto-
mobile
DAX
Negative impact on capital markets in 2018
At the beginning of the 2018 stock exchange year,
markets benefited initially from the prospect of robust
global growth and an easing of political tensions on
the Korean peninsula. Accordingly, the German stock
index (DAX) recorded an all-time high of 13,560 points
in January 2018. Subsequently, however, stock market
developments were negatively affected by the results
of parliamentary elections in Italy and the intensifi-
cation of the trade dispute between China and the
USA. Initial fears were confirmed at the beginning of
the third quarter when higher tariffs were introduced
in July on goods traded between China and the USA.
Uncertain prospects of a rapprochement in the trade
dispute caused prices to fluctuate more widely as
the year progressed, resulting in a generally volatile
market environment. Alongside the US- China trade
conflict, American import duties on steel and alumini-
um coming from the European Union (EU) also caused
uncertainty as from the end of the second quarter.
Moreover, there were discussions regarding a potential
increase in US import duties on European automobile
imports which had a dampening effect on stock mar-
kets. A meeting between US President Trump and
To Our Shareholders 21
200
150
100
50
DAX
BMW preferred stock
Prime Automobile
BMW common stock
BMW AG development of stock
• 10
Index: December 2013 = 100
200
150
100
50
Source: Reuters.
2014
2015
2016
2017
2018
2019
European Commission President Juncker at the end
of July, which raised hopes of a possible rapproche-
ment in the trade dispute, seemed to ease the situ-
ation and helped drive up share prices temporarily.
However, renewed rumours of tariff hikes between
the EU and the US in November again caused market
unease. In addition to trade policy issues, the budget
debate in Italy as well as discussions regarding the
potential repercussions of Brexit darkened the mood
on capital markets during the fourth quarter. Towards
the end of the year, market sentiment was influenced
by the US Federal Reserve’s (Fed) monetary policies.
A further rise in the key interest rate prior to the
year- end caused share prices to fall once again.
The DAX closed the stock exchange year at
10,559 points, down 18.3 % compared to the end of
2017 (12,918 points). Compared to its high for the
year (13,560 points), the DAX lost 22.1 % in value by
the end of the year.
The EURO STOXX 50 fared slightly better than the
DAX, finishing the year 14.3 % lower at 3,001 points.
From May onwards, the Prime Automobile Index was
significantly weaker on account of the factors referred
to above. Higher upfront expenditure by automotive
companies for future technologies and possible trade
conflicts between the USA and China on the one hand
and the USA and Europe on the other dampened
market sentiment. The transition to a new emissions
standard (Worldwide Harmonised Light Vehicle Test
Procedure, WLTP) led to delivery bottlenecks for some
automobile manufacturers. These developments were
also reflected in the prices of auto stocks. As a result,
the sector index fell by 27.2 % over the course of the
year, closing at 1,228 points.
BMW stock initially bucked the downward trend in
the first quarter of 2018. Since the second quarter,
however, BMW stock partially succumbed to the
general sector trend and also registered price losses.
Despite the challenging conditions currently facing
the automobile industry, which also resulted in the
BMW Group adjusting its outlook for the year in
September, BMW stock nevertheless outperformed
the market as a whole in the third quarter. Uncer-
tainties in the fourth quarter, exacerbated by fears
of a disorderly Brexit and an escalation in the trade
disputes between the USA and China and the USA
and Europe, exerted downward pressure on share
prices. Accordingly, BMW stock closed the year
with a performance similar to that of the DAX. BMW
common stock finished the year at € 70.70, down by
18.6 % since the beginning of the year. BMW preferred
stock performed similarly to BMW common stock,
finishing the year at € 62.10, 16.8 % lower than the
closing price recorded one year earlier.
Although affected by the generally un favourable mar-
ket environment, BMW stock held its value relatively
well, particularly in comparison with the sector index.
22
BMW AG Stock and
Capital Markets
in 2018
At the end of 2018, with a market capitalisation of
some € 46 billion, the BMW Group remained among
the ten most valuable German enterprises listed on
the stock market.
Ratings remain at top level
The BMW Group continues to be the best-rated car-
maker in Europe.
Company rating
Non-current financial liabilities
Current financial liabilities
Outlook
Moody’s
Standard &
Poor’s
A1
P -1
A+
A -1
stable
stable
Since December 2013, BMW AG has had a long-term
rating of A+ (stable outlook) and a short-term rating
of A-1 from the rating agency Standard & Poor’s.
This represents the highest rating currently given by
Standard & Poor’s to a European car manufacturer.
In January 2017, Moody’s raised its long-term rating
for BMW AG from A2 (positive outlook) to A1 (stable
outlook). The P-1 short-term rating was confirmed.
The assessment of both rating agencies reflects
the attractive product launches that are part of the
current model offensive, the excellent positioning
of the BMW Group with respect to the challenges
faced by the automobile industry and a strong
operating performance. BMW AG’s solid capital
structure and prudent financial approach also under-
pins the dependable financial profile and excellent
creditworthiness of the BMW Group as a whole.
Consequently, the Company not only has good access
to international capital markets, but also benefits
from attractive refinancing conditions.
* Prior year figures
adjusted due to
first-time applica-
tion of IFRS 15,
see note 6 to the
Group Financial
Statements.
Employee Share Programme
For more than 40 years, BMW AG has enabled its
employees to participate in its success. Since 1989,
this participation has taken the form of an Employee
Share Programme. In 2018, a total of 521,524 shares
of preferred stock were issued to employees under
the terms of this programme.
In this context, and with the approval of the Super-
visory Board, in 2018 the Board of Management
increased BMW AG’s share capital by € 521,500 from
€ 657,600,600 to € 658,122,100 by issuing 521,500 new
non-voting shares of preferred stock. This increase
was implemented on the basis of Authorised Capital
2014 contained in Article 4 (5) of the Articles of Incor-
poration. The new shares of preferred stock carry the
same rights as existing shares of preferred stock. The
newly issued shares of preferred stock for employees
are entitled to receive dividends with effect from the
financial year 2019. In addition, 24 shares of preferred
stock were repurchased via the stock market or were
acquired as a result of cancelled employee purchases
relating to the previous year.
Dividend below previous year
The Board of Management and the Supervisory Board
are proposing to the Annual General Meeting to use
BMW AG’s unappropriated profit of € 2,303 million
(2017: € 2,630 million) for the payment of a dividend
of € 3.50 per share of common stock (2017: € 4.00) and
a dividend of € 3.52 per share of preferred stock (2017:
€ 4.02). The payout ratio for 2018 therefore stands at
32.0 % (2017: 30.3 %*).
To Our Shareholders BMW AG stock
• 11
common stock
Number of shares in 1,000
Stock exchange price in € 1
Year-end closing price
High
Low
preFerred stock
Number of shares in 1,000
Stock exchange price in € 1
Year-end closing price
High
Low
key dAtA per shAre in €
Dividend
Common stock
Preferred stock
Earnings per share of common stock 3
Earnings per share of preferred stock 4
Free cash flow Automotive segment
Equity
23
2018
2017
2016
2015
2014
601,995
601,995
601,995
601,995
601,995
70.70
96.26
69.86
86.83
90.83
77.71
88.75
92.25
65.10
97.63
122.60
75.68
89.77
95.51
77.41
56,127
55,605
55,114
54,809
54,500
62.10
82.50
60.70
3.50 2
3.52 2
10.82
10.84
4.12
88.26
74.64
78.89
67.29
4.00
4.02
13.07 5
13.09 5
6.78
82.30 5
72.70
74.15
56.53
3.50
3.52
10.45
10.47
8.81
72.08
77.41
92.19
58.96
3.20
3.22
9.70
9.72
8.23
67.84
74.60
59.08
2.90
2.92
8.83
8.85
5.30
65.11
57.03
1 Xetra closing prices.
2 Proposed by management.
3 Weighted average number of shares for the year.
4 Stock weighted according to dividend entitlements.
5 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
24
BMW AG Stock and
Capital Markets
in 2018
Intensive communication with capital markets
continued
The BMW Group continued to inform investors, ana-
lysts and rating agencies throughout 2018 with regular
quarterly and year-end financial reports. The com-
prehensive information package provided for capital
market participants included numerous one-on-one
and group meetings, dedicated socially responsible
investment (SRI) roadshows for investors using sus-
tainability criteria in their investment decisions, and
roadshows as well as conferences for debt investors
and credit analysts. Topics discussed included busi-
ness model developments, digitalisation and other
technological trends in the automobile industry as
well as the relevance of alternative drivetrain systems.
Apart from participating in various conferences and
roadshows, product presentations and a technology
workshop were held for analysts and investors in
Munich during the course of the year. Further infor-
mation on the BMW Group’s capital market commu-
nications is available at
www.bmwgroup.com / ir.
To Our Shareholders 2
Combined
Management
Report
General Information
and Group Profile
Economic Position
Outlook, Risks and
Opportunities
COMBINED MANAGEMENT
REPORT
Page 26 General Information and Group Profile
Page 26 Organisation and Business Model
Page 36 Management System
Page 40 Report on Economic Position
Page 40 General and Sector-specific Environment
Page 44 Overall Assessment by Management
Page 45 Comparison of Forecasts for 2018 with Actual Results in 2018
Page 48 Review of Operations
Page 48 Automotive Segment
Page 53 Motorcycles Segment
Page 54 Financial Services Segment
Page 57 Research and Development
Page 58 Purchasing and Supplier Network
Page 59 Sales and Marketing
Page 61 Workforce
Page 63 Sustainability
Page 65 Results of Operations, Financial Position and Net Assets
Page 80 Comments on Financial Statements of BMW AG
Page 84 Report on Outlook, Risks and Opportunities
Page 84 Outlook
Page 90 Risks and Opportunities
Page 103
Internal Control System Relevant for Accounting
and Financial Reporting Processes
Page 104 Disclosures Relevant for Takeovers and Explanatory Comments
2
26
General Information
and Group Profile
Organisation and
Business Model
GENERAL
INFORMATION
AND GROUP
PROFILE
Over 140,000 electrified vehicles
delivered
Increasing R&D expenditure
secures future business
Customer in focus with innovative
offerings
High investments in the flexibility of
the production network
ORGANISATION AND
BUSINESS MODEL
www.bmwgroup.com / company
This Combined Management Report incorporates the
management reports of Bayerische Motoren Werke
Aktiengesellschaft (BMW AG) and the BMW Group.
General information on the BMW Group is provided
below. There have been no significant changes com-
pared to the previous year.
Bayerische Motoren Werke Aktiengesellschaft
(BMW AG), based in Munich, Germany, is the parent
company of the BMW Group. The general purpose of
the Company is the production and sale of engines,
engine-equipped vehicles, related accessories and
products of the machinery and metal-working
industry as well as the rendering of services related
to the aforementioned items. The BMW Group is
sub-di vided into the Automotive, Motorcycles and
Financial Services operating segments. The seg-
ment Other Entities primarily comprises holding
companies and Group financing companies. The
BMW Group operates on a global scale and is rep-
resented in more than 140 countries worldwide. At
the end of the reporting period, the BMW Group
employed a workforce of 134,682 people.
Founded in 1916 as Bayerische Flugzeugwerke AG
(BFW), Bayerische Motoren Werke G. m. b. H. came
into being in 1917 before finally becoming Bayerische
Motoren Werke Aktiengesellschaft (BMW AG) in 1918.
The BMW Group comprises BMW AG itself and all
subsidiaries over which BMW AG has either direct
or indirect control. BMW AG is also responsible for
managing the BMW Group as a whole.
The BMW Group is one of the most successful mak-
ers of automobiles and motorcycles worldwide and
among the largest industrial companies in Germany.
It is the only manufacturer that focuses exclusively on
the premium segment with all its brands. With BMW,
MINI and Rolls-Royce, the BMW Group owns three of
the best-known premium brands in the automotive
industry. In addition to its strong market position
in the premium segment of the global motorcycles
sector, the BMW Group is also successful in the
financial services business. Moreover, in recent years
the BMW Group has evolved into one of the leading
providers of premium services for individual mobility.
Combined Management Report 27
Motorcycles segment
The Motorcycles business is also clearly focused on
the premium segment. The model range currently
comprises motorcycles for the Sport, Tour, Roadster,
Heritage, Adventure and Urban Mobility (with
scooter models) segments. BMW Motorrad also offers
a broad range of equipment options to enhance rider
safety and comfort. The motorcycles business sales
network is organised similarly to that of the auto-
mobiles business. Currently, BMW motorcycles are
sold by more than 1,200 dealerships and importers
in over 90 countries.
Financial Services segment
The BMW Group is also a leading provider of financial
services in the automobile sector, operating more
than 50 entities and cooperation arrangements with
local financial services providers and importers
worldwide. The segment’s main business is credit
financing and the leasing of BMW Group brand cars
and motorcycles to retail customers. Customers can
also choose from an attractive array of insurance
and banking products. Operating under the brand
name Alphabet, the BMW Group’s international
multi-brand fleet business provides financing and
comprehensive management services for corporate
car fleets in 19 countries. In addition, international
customers are serviced by Alphabet cooperation
partners in numerous other countries. Through
its multi-brand business Alphera, the BMW Group
provides credit financing, leasing and other services
to retail customers.
The segment also supports the BMW Group’s dealer-
ship organisation, for example by financing dealer-
ship vehicle inventories.
In 2016, the BMW Group presented its Strategy
NUMBER ONE > NEXT. At the heart of Strat-
egy NUMBER ONE > NEXT is a commitment to
future-oriented activity with the development of
products, brands and services in the premium seg-
ment for individual mobility. New technologies such
as alternative drivetrains, digitalisation and connec-
tivity are further key areas of focus. Furthermore,
the strategy emphasises the increasing importance
of a customer-oriented approach.
Presentation of segments
In order to provide a better insight into the Group,
this report also includes a presentation of the
oper ating segments Automotive, Motorcycles and
Financial Services.
Automotive segment
The core BMW brand caters to a very broad array of
customer requirements, ranging from fuel-efficient
and innovative models fitted with Efficient Dynamics
to outstanding high-performance BMW M vehicles. A
wide range of plug-in hybrid vehicles is also available
and being continuously expanded. At the same time,
the BMW Group continues to redefine the meaning
of premium with its BMW i models. With an even
greater focus on innovation and sustainability, BMW i
embodies the vehicle of the future, with electric
drivetrains, connectivity, intelligent lightweight con-
struction, exceptional design and newly developed
mobility services.
The MINI brand is an icon that promises superior
driving fun in the premium small car segment.
Rolls-Royce is the ultimate marque in the ultra-luxury
segment with a tradition stretching back over more
than 100 years. Rolls-Royce Motor Cars specialises in
bespoke customer experiences and offers the highest
level of both quality and service.
The global sales network of the automobile business
currently comprises around 3,500 BMW, 1,600 MINI
and 140 Rolls-Royce dealerships. Within Germany,
sales are conducted through branches of the
BMW Group and independent authorised dealer-
ships. Sales outside Germany are handled primarily
by subsidiary companies and by independent import
companies in some markets.
28
General Information
and Group Profile
Organisation and
Business Model
Research and
Development
Research and Development
3. Connected
A major factor in the success of the BMW Group is
its consistent focus on the future. A long tradition
of innovation is an integral part of its corporate phi-
losophy. Shaping individual mobility and finding
innovative solutions today for the needs of tomorrow
is a key driving force. Research and development
(R&D) are therefore of key importance for the
BMW Group as a premium supplier and ensure its
long-term economic success.
As part of its Strategy NUMBER ONE > NEXT, the
BMW Group is focusing on the topics of electric
mobil ity, digitalisation and autonomous driving.
When developing new technologies, the emphasis
is always on creating added benefit for customers.
Anticipating the needs and wishes of customers in all
fields of technology and implementing developments
in a way that adds value for the customer are also
key prerequisites for the Group’s success going for-
ward. The BMW Group summarises the major trends
of individual mobility in the term D+ACES (Design,
Autonomous, Connected, Electrified, Services).
Accordingly, the BMW Group’s R&D activities include
the following five key topics:
1. Design
The BMW Group sees design as the characteristic
combination of aesthetics and technology. Out-
standing design involves focusing keenly on the
requirements of customers and anticipating
their wishes, enabling the BMW Group to con-
tinue finding ideal solutions for the (mobility)
needs of its customers. As a premium provider,
the BMW Group not only aspires to meeting its
customers’ requirements, but also to exceeding
their expectations in every respect. A ground-
breaking design underlines the distinctive charac-
ter of each new vehicle and thus strengthens all
of the Group’s brands.
2. Autonomous
Since 2018, the BMW Group has pooled its con-
siderable development expertise in the fields of
state-of-the-art driver assistance systems and
highly or fully autonomous driving at its own de-
velopment centre. During the final phase of de-
velopment, some 1,800 people will be working
there. The clear aim is to create an open plat-
form for highly and fully automated driving that
will serve as an industry standard going forward.
Today already, the BMW Group offers driver assis-
tant systems for partially automated driving.
With the BMW iNEXT, the Group will offer highly
automated driving for the first time from 2021.
Digital change is of great significance for the au-
tomobile industry. One of the most important
effects of digitalisation is that the vehicle itself
becomes the focal point of the customer’s digital
experience. The BMW Group recognised cus-
tomer trends at an early stage and, with BMW
Connected and a growing range of digital of-
ferings, it is well prepared to meet demand aris-
ing in this field. This is not merely developing
and integrating new technologies and services
for the vehicle. The focus is very much on cus-
tomers and their aspirations for modern-day mo-
bility. Digital services that the customer is used
to should be available seamlessly and without
restriction – both inside and outside the vehicle.
The option of using BMW Group services almost
anywhere and at any time is the basic prerequi-
site for offering a range of digital services geared
solely to customers and their personal needs.
These include, for example, the availability of
personalised and context-based information
within the vehicle.
For customers, the experience begins before pur-
chasing the vehicle, for example through virtual
reality options that offer new ways to configure
the vehicle and explore products interactively.
The customer can also be kept in the loop while
waiting for the new vehicle to be manufactured,
thus ensuring greater involvement in the produc-
tion process from an early stage. The BMW Con-
nectedDrive Store enables customers to reserve
new services at any time for a specified period.
The BMW Intelligent Personal Assistant has been
available in BMW vehicles since March 2019.
Autonomous driving, electrification and ever-
greater connectivity will open up opportunities
for completely new experiences and ways to
shape travel in the future. At the same time,
however, those opportunities will also change
people’s wishes and lifestyles. Precisely this
development is supported by the BMW Group’s
intelligent platform, which will enable drivers
to switch seamlessly and without restrictions from
one vehicle to the next with just one customer
profile, across each vehicle’s life cycle. Moreover,
in future all products and services relating to
individual mobility will be bundled here and grad-
ually developed to form a comprehensive digital
ecosystem.
Combined Management Report
29
at the IAA Cars in the same year. The series
launch of all-electric MINI vehicles is scheduled
to begin in 2019.
The Vision 100 study presented for the Rolls-Royce
brand in 2016 gave customers a first glimpse into
the future of automobile luxury powered by elec-
tric drivetrains.
5. Services
The BMW Group aims to be the leading provider
of premium mobility services going forward.
To achieve this goal, it is essential to have a clear
understanding of the needs of customers world-
wide. This knowledge is the basis for providing
an attractive, comprehensive range of services.
These include easy-to-use, digitally supported
mobility services that also feature bring-and-
collect services or help customers find free park-
ing spaces in urban environments.
At 31 December 2018, over 15,000 people at 16 locations
in five countries were working in the BMW Group’s
global research and innovations network.
Year-on-year, research and development expenditure
rose significantly to € 6,890 million (2017: € 6,108 mil-
lion; + 12.8 %). The R&D expenditure ratio stood at
7.1 % (2017: 6.2 %). The ratio of capitalised development
costs to total research and development expenditure
(capitalisation ratio) stood at 43.3 % for the period
under report (2017: 39.7 %). Amortisation of capitali-
sed development costs totalled € 1,414 million (2017:
€ 1,236 million; 14.4 %). Further information on R&D
expenditure is provided in the “Report on Economic
Position (Results of Operations)” and in note 9 to
the Group Financial Statements.
see
note 9
In 2018, numerous awards and prizes once again
underscored the BMW Group’s high level of innovative
expertise, particularly in design, the use of innovative
technologies as well as the intelligent connectivity of
drivers, vehicles and environment.
Alongside automated driving, systematically
enhancing the scope of connectivity on the road
to a digital, emission-free future is one of the
key areas in which the BMW Group is helping
transform the mobility sector with its Strategy
NUMBER ONE > NEXT.
4. Electrified
Another topic of strategic importance for the
BMW Group is the continuous optimisation of
the energy efficiency of its automobiles and
motorcycles, including the electrified vehicles
manufactured for the BMW, MINI, Rolls Royce
and BMW Motorrad brands. Under the term
Efficient Dynamics, the BMW Group has been
successfully working for years on reducing fuel
consumption and vehicle emissions through the
development of highly efficient combustion
engines, the electrification of drivetrains, intelli-
gent lightweight construction, improved aero-
dynamics and coordinated energy management
in vehicles.
The BMW i brand reflects Efficient Dynamics in
its most systematic form. Vehicle architectures
customised for electric mobility, innovative elec-
tric and plug-in hybrid drivetrains, and the use
of new types of materials are the results of an inte-
grated approach that is also reflected in a re-
source- efficient selection of materials and the
intensive use of renewable energy in the pro-
duction process. This strategy contributes to a
very favourable environmental footprint made
by BMW i vehicles over their entire product life
cycle.
As an important pillar of the BMW brand, vehi-
cles equipped with plug-in hybrid drivetrains
represent a good alternative product offering for
customers. All plug-in models are equipped with
a smart energy management system that ensures
ideal interaction between the combustion engine
and the electric motor. The option to drive fully
electrically, added efficiency gained through elec-
tric assistance features, and the spontaneous re-
sponse characteristics provided by the additional
electric drivetrain lead to a new harmony of dri-
ving pleasure and sustainability. The flexibility of
the technologies used makes it possible to extend
the broad range of models fitted with plug-in
hybrid drivetrains as required.
With its MINI Electric, MINI is reinterpreting the
urban tradition of the brand for the electric age
and reinventing individual mobility for the city.
The market launch of the MINI* brand’s first
plug-in hybrid in 2017 was followed by the pre-
sentation of the all-electric MINI Electric Concept
* Fuel
consumption
and CO2 emis-
sions informa-
tion are available
on page 108.
30
General Information
and Group Profile
Organisation and
Business Model
Cooperation
Agreements and
Partnerships
Sustainability
Cooperation Agreements and
Partnerships
Sustainability
The BMW Group is a pioneer of sustainability not only
within the automotive industry, but across other sec-
tors, too. Long-term thinking and responsible action
have long been the foundations of the BMW Group’s
distinct identity and its economic success. As early as
1973, the BMW Group was among the first to appoint
an environmental officer in the automobile sector.
Today, the Sustainability Board, comprising all mem-
bers of the Board of Management, sets the strategic
direction along with binding targets. Since 2001,
the BMW Group has been committed to the United
Nations Environment Programme, the UN Global
Compact and the Cleaner Production Declaration.
The principles and importance of managing the busi-
ness on a sustainable basis are emphasised in the
new Strategy NUMBER ONE > NEXT, which includes
a clear commitment to preserving resources. The
BMW Group remains fully committed to ecological
and social sustainability along the entire value chain
as well as to comprehensive product responsibility.
The BMW Group takes a holistic approach to sustaina-
bility management that encompasses the entire value
chain. Apart from the reduction of CO2 emissions,
key components of the Group’s sustainability strategy
include operational environmental protection, sus-
tainability in the supply chain, employee orientation
and social commitment.
1 EU-28
2 Value according
to planned
conversion to
WLTP
Since 1995, the BMW Group has cut the CO2 emis-
sions of its new vehicles sold in Europe 1 by more
than 42 %. Average CO2 emissions in Europe 1 in
2018 amounted to 128 g CO2 / km (adjusted value for
2017: 128 g CO2 / km) 2. In 2018, more than 140,000
electrified vehicles were sold within one year for
the first time.
In order to secure the success of the business in the long
term, the BMW Group enters into specific cooperation
agreements and partnerships with companies both
from the automotive sector but also with technology
leaders in other industries. Against a backdrop of
rapid technological change, the aim of collaborating
with external partners is to combine expertise in order
to bring innovations to customers within the shortest
time possible.
The BMW Group and Daimler AG are merging their
mobility services in a new joint venture in order
to achieve dynamic growth in a highly competitive
environment. In this way, both companies are pro-
moting the vision of pure electric and autonomous on-
demand mobility simultaneously. The aim is to further
expand existing offerings in the areas of car-sharing,
ride-hailing, parking, charging und multimodality
and to interlock even more closely with one another
in the long term. The new mobility offering is to be
accessible, intuitive and aligned towards the needs
of the user. The newly founded company seeks to
increase the quality of urban life and to prepare the
way for a world with autonomous vehicles.
To coincide with the 15th anniversary of BBA, the
joint venture announced extensive investments in
new and existing plant structures in order to cover
future market requirements. The BMW Group intends
to increase its stake in BBA from 50 to 75 %. During
an anniversary celebration, the BMW Group signed
an agreement to that effect with its partner Brilliance
China Automotive Holdings Ltd. (CBA). The contrac-
tual term of the joint venture, which is due to end in
2028, is to be extended up to 2040. After approval
by the Annual General Meeting of CBA on 18 Janu-
ary 2019, the agreement is also subject to regulatory
approvals.
Additionally, the BMW Group signed an agreement
with the Chinese manufacturer Great Wall Motor
Company Limited for the production of electric MINI
vehicles in China in a 50-50 joint venture. In addition
to electric MINI Vehicles, the joint venture, Spotlight
Automotive Limited, will also produce electric vehicles
for Great Wall Motor. The formal establishment of
the new company remains subject to approval from
the relevant Chinese authorities. Together with the
planned increase of share in BBA, the BMW Group
is significantly expanding its presence in China and
underscoring its local engagement.
Combined Management Report With effect from September 2018, all vehicles in the
EU are required to be approved in accordance with
the new WLTP testing cycle. However, the calculation
of CO2 fleet emissions by the EU Commission will
not be converted to WLTP until 2021. Therefore, for
reporting purposes up to and including 2020, WLTP
fleet emissions must be translated back to the previ-
ously applicable values calculated in accordance with
the outgoing New European Driving Cycle (NEDC).
Due to the changed test conditions used for WLTP
purposes, values for emissions are higher when trans-
lated back to a NEDC basis (NEDC-correlated). In
order to ensure comparability, CO2 fleet emissions for
2017 (122 g CO2 / km according to NEDC) were con-
verted to a correlated NEDC value of 128 g CO2 / km
under WLTP test conditions and published in the
Quarterly Report to 30 June 2018. The conversion
to WLTP at the BMW Group went according to plan.
The BMW Group has set itself the goal of being a
leader in the use of renewable energy in production
and the value chain. In 2018, 79 % (2017: 81 %) of
the BMW Group’s bought-in electricity worldwide
came from renewable sources. In view of increasingly
complex supplier relationships, it is important for
the BMW Group to work together with suppliers to
increase transparency and resource efficiency along
the supply chain. The BMW Group requires suppliers
to comply with environmental and social standards
across the value chain.
The BMW Group attaches great importance to training
and developing its workforce. In 2018, investment in
training and development programmes across the
Group amounted to € 373 million (2017: € 349 million).
In addition, 1,656 trainees were hired worldwide.
A total of 4,964 young people are currently under-
going vocational training or participating in internal
programmes to develop young talent.
31
Social engagement is also an integral part of the
BMW Group’s understanding of its corporate respon-
sibility. For several years now, the BMW Group has
firmly supported intercultural exchange. In part-
nership with the UN Alliance of Civilizations, the
BMW Group presents the Intercultural Innovation
Award for exemplary projects in this field. Since 2011,
the Company has presented the “BMW Group Award
for Social Commitment” every year to employees who
have made an exceptional contribution through their
outstanding volunteer work.
The Group addresses current social challenges, pri-
marily where its strengths make it the most effective.
The main focus here is on problem-solving approaches
that are internationally applicable and have a tangi-
ble long-term impact according to the principle of
“helping people to help themselves”. For this purpose,
the BMW Group works together with the BMW Foun-
dation Herbert Quandt.
BmW Foundation Herbert Quandt
In 1959, Herbert Quandt secured the independence of
BMW AG, thus laying the foundation for the successful
development of the BMW Group. In recognition of
his entrepreneurial achievements, in 1970 BMW AG
established the “BMW Stiftung Herbert Quandt”,
which has meanwhile been renamed the “BMW Foun-
dation Herbert Quandt” with expanded endowment
capital. With its Responsible Leadership programmes,
a global network and impact-oriented investments,
the BMW Foundation Herbert Quandt supports the
sustainable development goals of the United Nations’
Agenda 2030.
Further information on the topics of sustainability
and human resources within the BMW Group is
available in the sections Sustainability and Workforce,
respectively, of the Group Management Report and
in the Sustainable Value Report 2018 published on
the Company’s website at
www.bmwgroup.com / svr.
32
Production Network
General Information
and Group Profile
Organisation and
Business Model
Production Network
The production network comprises a total of 31 loca-
tions in 15 countries, whereby 20 of the 31 locations
are BMW Group plants. Three locations belong to the
BMW Brilliance Automotive joint venture in China.
Eight production sites are operated by partners or
contract manufacturers. The same standards of
quality, safety and sustainability apply at all loca-
tions within the BMW Group’s production network
worldwide.
Products
BMW 3 Series, BMW X1, BMW X3, BMW X4
BMW motorcycles, Maxi-Scooters, car brake discs
BMW 3 Series, BMW 5 Series, BMW 6 Series, BMW 7 Series,
BMW X1, BMW X3, BMW X4, BMW X5, MINI Countryman
BMW 3 Series, BMW 4 Series, BMW 5 Series, BMW 6 Series,
BMW 7 Series, BMW 8 Series, BMW M
Chassis and drivetrain components
Components for electric mobility
Rolls-Royce bodywork, pressed parts
Country
Brazil
Germany
India
Germany
Germany
Toolmaking, outer body parts for Rolls-Royce, aluminium tanks for BMW Motorrad
United Kingdom
Germany
Germany
Brazil
Germany
United Kingdom
Thailand
Germany
South Africa
Mexico
USA
Austria
United Kingdom
Germany
Lightweight construction components, electric drivetrain systems and special engines
Petrol engines for BMW, MINI
BMW i8 plug-in hybrid engines
Core engine parts
BMW 1 Series, BMW 2 Series, BMW i, BMW M
Motorcycles
BMW 3 Series, BMW 4 Series, BMW M
Petrol and diesel engines, high-performance engines for M models
Core engine parts
MINI Hatch, MINI Clubman
BMW 3 Series, BMW 5 Series, BMW 7 Series,
BMW X1, BMW X3, BMW X4, BMW X5
Motorcycles
BMW 1 Series, BMW 2 Series, BMW 3 Series, BMW 4 Series,
BMW X1, BMW X2, BMW M
BMW 3 Series, BMW X3
BMW 3 Series
BMW X3, BMW X4, BMW X5, BMW X6, BMW X7, BMW M
Petrol and diesel engines for BMW and MINI
Core engine parts
High-performance engines for M models
Pressed parts and bodywork components
Distribution centre for parts and components
Cockpit assembly
Processing of carbon fibre components
Locations
BmW Group plAnts
Araquari
Berlin
Chennai
Dingolfing
Eisenach
Hams Hall
Landshut
Leipzig
Manaus
Munich
Oxford
Rayong
Regensburg
Rosslyn
San Luis Potosí 1
Spartanburg
Steyr
Swindon
Wackersdorf
Rolls-Royce Manufacturing Plant Goodwood
United Kingdom
Rolls-Royce Phantom 2, Ghost, Wraith, Dawn, Cullinan 2
1 2018 only pre-series production, plant opens in 2019.
2 Fuel consumption and CO2 emissions information are available on page 108.
Combined Management Report The plants in Shenyang (China) are operated by the
joint venture BMW Brilliance Automotive (BBA).
The Shenyang site comprises the Dadong and Tiexi
automobile plants. Tiexi also has an engine plant with
a foundry and a battery factory.
Locations
Joint venture BmW BrilliAnce
Automotive holdinGs ltd.
Dadong (Shenyang)
Tiexi (Shenyang)
Tiexi (Shenyang)
Country
China
China
China
Products
BMW 5 Series, BMW X3
BMW 1 Series, BMW 2 Series, BMW 3 Series, BMW X1
Petrol engines, production of core engine parts
33
The main function of the BMW Group’s four partner
plants is to serve regional markets. During the year
under report, BMW and MINI vehicles were also
manufactured in Jakarta (Indonesia), Cairo (Egypt),
Kaliningrad (Russia) and Kulim (Malaysia).
Locations
PARTNER PLANTS
Jakarta
Cairo
Kaliningrad
Kulim
Country
Indonesia
Products
BMW 3 Series, BMW 5 Series, BMW 7 Series,
BMW X1, BMW X3, BMW X5, MINI Countryman
Egypt
BMW 3 Series, BMW 5 Series, BMW 7 Series, BMW X1, BMW X3, BMW X5, BMW X6
Russia BMW 3 Series, BMW 5 Series, BMW 7 Series, BMW X1, BMW X3, BMW X4, BMW X5, BMW X6
Malaysia
BMW 1 Series, BMW 3 Series, BMW 5 Series, BMW 6 Series, BMW 7 Series,
BMW X1, BMW X3, BMW X4, BMW X5, MINI Countryman
The BMW Group also awards production contracts to
external partners for specific types of vehicle as well as
motorcycles. During the period under report, Magna
Steyr Fahrzeugtechnik produced the BMW 5 Series
Sedan and BMW Z4 in Graz (Austria). Moreover,
various MINI models and the BMW X1 were assembled
at VDL Nedcar in Born (Netherlands). BMW motor-
cycles and scooters were also manufactured by the part-
ner companies TVS Motor Company in Hosur (India)
and Loncin Motor Co., Ltd in Chongqing (China).
Locations
Country
Products
contrAct production
Born
Chongqing
Graz
Hosur
Netherlands
China
Austria
India
MINI Hatch, MINI Convertible, MINI Countryman, BMW X1
Scooter
BMW 5 Series, BMW Z4
Motorcycles
34
General Information
and Group Profile
Organisation and
Business Model
BMW Group locations worldwide
• 12
43
Sales subsidiaries and
Financial Services
locations worldwide
31
Production and
assembly plants
16
Research and
development
locations
Headquarters
Canada
usA
Mexico
United Arab
Emirates
Brazil
Argentina 1
South Africa
New Zealand
Russia
India
China
South Korea
Japan
Hong Kong
Thailand
Malaysia
Singapore 1
Indonesia 1
Australia
Research and development
network outside Europe
BMW Group Designworks, Newbury
Park, USA
BMW Group Technology Office USA,
Mountain View, USA
BMW Group Engineering and
Emission Test Center,
Oxnard, USA
BMW Group ConnectedDrive Lab
China, Shanghai, China, and
BMW Group Designworks Studio
Shanghai, China
BMW Group Technology Office,
Shanghai, China
BMW Group Engineering China,
Beijing, China
BMW Group Engineering Japan,
Tokyo, Japan
BMW Group Engineering USA,
Woodcliff Lake, USA
Partner plants
outside Europe
Partner plant, Chongqing, China
Partner plant, Hosur, India
Partner plant, Jakarta, Indonesia
Partner plant, Cairo, Egypt
Partner plant, Kaliningrad, Russia
Partner plant, Kulim, Malaysia
BMW Technology, Chicago, USA
Production
outside Europe
BMW Group plant Araquari, Brazil
BMW Group plant Chennai, India
BMW Group plant Manaus, Brazil
BMW Group plant Rayong, Thailand
BMW Group plant Rosslyn, South Africa
BMW Group plant San Luis Potosí 2,
Mexico
BMW Group plant Spartanburg, USA
BMW Brilliance Automotive, China
(joint venture – 3 plants)
1 Sales locations only.
2 2018 only pre-series production, plant opens in 2019.
Sales subsidiaries and
Financial Services
locations worldwide
Combined Management Report
BMW Group locations in Europe
• 13
35
Sweden
Finland 1
Denmark
Czech
Republic 1
Poland
Austria
Slovakia 1
Hungary 1
Romania 1
Bulgaria 1
Greece
Norway
Germany
Netherlands
uk
Ireland
Belgium
France
Switzerland
Spain
Portugal
Italy
Slovenia 1
Malta
Production in Europe
BMW Group plant Berlin
BMW Group plant Dingolfing
BMW Group plant Eisenach
BMW Group plant Landshut
BMW Group plant Leipzig
BMW Group plant Munich
BMW Group plant Regensburg
BMW Group plant Wackersdorf
BMW Group plant Steyr, Austria
BMW Group plant Hams Hall, UK
BMW Group plant Oxford, UK
BMW Group plant Swindon, UK
Rolls-Royce Manufacturing Plant,
Goodwood, UK
Research and development
network in Europe
BMW Group Research and Innovation
Centre (FIZ), Munich, Germany
BMW Group Research and
Technology, Munich, Germany
BMW Group Autonomous Driving
Campus, Unterschleißheim, Germany
BMW Group Designworks, Munich,
Germany
BMW Car IT, Munich, Germany
BMW Group Lightweight
Construction and Technology Center,
Landshut, Germany
BMW Group Diesel Competence
Centre, Steyr, Austria
Partner plants
in Europe
Partner plant, Born,
Netherlands
Partner plant, Graz,
Austria
Sales subsidiaries and
Financial Services
locations Europe
36
General Information
and Group Profile
Management System
MANAGEMENT SYSTEM
The business management system applied by the
BMW Group follows a value-based approach that
focuses on profitability, consistent growth, value
enhancement for capital providers and job security.
Capital is considered to be employed profitably when
the amount of profit generated sustainably exceeds
the cost of equity and debt capital. In this way, the
desired degree of corporate autonomy is also secured
in the long term.
BMW Group – value drivers
• 14
The BMW Group’s internal management system is
based on a multi-layered structure. Operating manage-
ment occurs primarily at segment level. In order to
manage long-term corporate performance and assess
strategic issues, additional key performance indicators
are taken into account within the management system
at Group level. In this context, value added serves as
one of several indicators for the contribution made
to enterprise value during the financial year. This
approach is made operational at both Group and
segment level through key financial and non-finan-
cial performance indicators (value drivers). The link
between value added and the relevant value drivers
is shown in a simplified form below.
Value added
–
Return on capital
(RoCE or RoE)
×
Profit
–
Expenses
Revenues
Capital employed
Average weighted
cost of capital rate
Return on sales
Capital turnover
Cost of capital
÷
÷
×
Combined Management Report Due to the high level of aggregation, it is impractical
to manage the business on the basis of value added.
This key indicator therefore only serves for reporting
purposes. Relevant value drivers having a significant
impact on business performance and therefore on
enterprise value are defined for each controlling
level. The financial and non-financial value drivers
are reflected in the key performance indicators used
to manage the business. In the case of project- related
decisions, the system follows a project-oriented
manage ment logic that is based on value added and / or
profitability, thereby providing a fundamental basis
for decision-making.
Management of operating performance
at segment level
Operating performance at segment level is managed at
an aggregated level on the basis of returns on capital.
Depending on the business model, the segments are
measured on the basis of return on total capital or
equity. Specifically, return on capital employed (RoCE)
is used for the Automotive and Motorcycles segments
Return on capital employed*
• 15
37
and return on equity (RoE) for the Financial Services
segment. These indicators combine a wide range of
relevant economic information, such as profitabil-
ity (return on sales) and capital efficiency (capital
turnover) to provide a measurement of segment
performance and the development of enterprise value.
Automotive segment
The most comprehensive key performance indica-
tor used for the Automotive segment is RoCE. This
indicator provides information on the profitability of
capital employed and the operational business. RoCE
is measured on the basis of segment profit before
financial result and the average capital employed in
the segment. The strategic target for the Automotive
segment’s RoCE is 26 %.
RoCE Automotive =
Profit before
financial result
Average capital
employed
Profit before financial result in € million
Average
capital employed in € million
Return on capital employed in %
Automotive
6,182
7,888
12,420
10,147
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2018
2017
2018
2017
2018
49.8
2017
77.7
a significant long-term impact on Group performance.
Fleet emissions correspond to average CO2 emissions
of new cars sold in the EU-28 countries.
By managing the business on the basis of key value
drivers, it is possible to gain a better understanding
of the causes of changes in the RoCE and to define
suitable measures to influence it.
Capital employed corresponds to the sum of all
current and non-current operational assets, less
liabilities that do not incur interest (e. g. trade payables
and other provisions).
Due to its key importance for the Group as a whole,
the Automotive segment is managed on the basis of
additional key performance indicators which have a
significant impact on RoCE and hence on segment
performance. These value drivers are the number of
vehicle deliveries and the operating return on sales
(EBIT margin: segment-related profit / loss before
financial result as a percentage of segment rev enues)
as the key performance indicator for segment prof-
itability. The management system also takes into
account average CO2 emissions for the fleet, which,
through their influence on ongoing development
costs and due to regulatory requirements, can have
38
General Information
and Group Profile
Management System
Motorcycles segment
As with the Automotive segment, the Motorcycles
segment is managed on the basis of RoCE. Capital
employed is determined on the same basis as in the
Automotive segment. The strategic RoCE target for
the Motorcycles segment is 26 %.
roce
Motorcycles
=
Profit before
financial result
Average capital
employed
Return on capital employed*
• 16
Motorcycles
Profit before financial result in € million
Average
capital employed in € million
Return on capital employed in %
2018
175
2017
207
2018
616
2017
609
2018
28.4
2017
34.0
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
In view of its increasing strategic importance, the
Motorcycles segment adopted the operating return
on sales (EBIT margin: segment-related profit / loss
before financial result as a percentage of segment
revenues) as a key performance indicator with effect
from the financial year 2017. The long-term target
range is between 8 and 10 %. Used in combination
with the number of motorcycle deliveries as a non-
financial value driver, the segment can exert a greater
influence on the development of RoCE.
of return on equity. RoE is defined as segment profit
before tax, divided by the average amount of equity
capital in the Financial Services segment. In view
of generally increasing regulatory requirements, a
greater volume of equity capital will be allocated to
the segment in future, which will result in a lower
RoE. In this context, the long-term target return was
changed with effect from the 2018 financial year from
at least 18 % to at least of 14 %.
Financial Services segment
As is common practice in the banking sector, the
Financial Services segment is managed on the basis
RoE Financial
Services
=
Profit before tax
Average equity capital
Return on equity
• 17
Financial Services
2,161
2,207
14,630
12,167
2018
2017
2018
2017
2018
14.8
2017
18.1
Profit before tax in € million
Average equity capital in € million
Return on equity in %
Combined Management Report
39
Strategic management at Group level
Strategic management and quantification of financial
implications for long-term corporate planning are
performed primarily at Group level. The key perfor-
mance indicators are Group profit before tax and the
size of the Group’s workforce at the year-end. Group
profit before tax provides a comprehensive measure
of the Group’s overall performance after consolida-
tion effects and a transparent basis for comparing
performance, particularly over time. The size of the
Group’s workforce is monitored as an additional key
non-financial performance indicator.
The information provided by these two key perfor-
mance indicators is further complemented by pre-tax
return on sales and value added. Value added, as
a highly aggregated performance indicator, also
provides an insight into capital efficiency and the
(opportunity) cost of capital required to generate
Group profit. A positive value added means that
a company is generating more value than the cost
of capital.
Value added
Group
= earnings amount –
cost of capital
= earnings amount –
(cost of capital rate ×
capital employed)
Value added Group*
• 18
in € million
BMW Group
Earnings amount
Cost of capital (equity + debt capital)
Value added Group
2018
2017
2018
2017
2018
2017
10,086
10,978
7,298
6,804
2,788
4,174
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
Capital employed comprises the average amount
of Group equity employed during the year as a
whole, the financial liabilities of the Automotive
and Motorcycles segments, and pension provisions.
The earnings amount corresponds to Group profit
before tax, adjusted for interest expense incurred in
conjunction with the pension provision and on the
financial liabilities of the Automotive and Motor-
cycles segments (earnings before interest expense
and taxes). The cost of capital is the minimum rate of
return expected by capital providers in return for the
capital employed. Since capital employed comprises
an equity capital (e. g. share capital) and a debt capital
element (e. g. bonds), the overall cost of capital rate
is determined on the basis of the weighted average
rates for equity and debt capital, measured using
standard market procedures. The pre-tax average
weighted cost of capital for the BMW Group in 2018
was 12 %, unchanged from the previous year.
Value-based project management
Operational business in the Automotive and Motor-
cycles segments is largely shaped by its life-cycle-
dependent project character. Projects have a substantial
influence on future business performance. Project
decisions are therefore a crucial component of financial
management in the BMW Group.
Project decisions are based on calculations derived
from expected cash flows of the individual project.
Calculations are made for the full term of a project,
incorporating future years in which the project is
expected to generate cash flows. Project decisions
are taken on the basis of net present value and the
internal rate of return calculated for the project.
The net present value of a project indicates the extent
to which a project will be able to generate a positive
contribution to earnings over and above the cost of
capital. A project with a positive net present value
enhances value added and therefore results in an
increase in enterprise value. The internal rate of return
of the project corresponds to the average return on
capital employed in the project. It is equivalent to the
multi-year average RoCE for an individual project. It is
therefore consistent with one of the key performance
indicators.
For all project decisions, the project criteria and
long-term periodic results impact are measured and
incorporated in the long-term Group forecast. This
approach enables an analysis of the impact of project
decisions on periodic earnings and rates of return for
each year during the term of the project. The overall
result is a cohesive management model.
40
Report on
Economic Position
General and Sector-
specific Environment
REPORT
ON ECONOMIC
POSITION
Automobile and motorcycle deliveries
reach record levels
Business performance impacted by
various factors
Group profit before tax
down moderately
€ 9,815 million
– 8.1 %
GENERAL AND
SECTOR-SPECIFIC
ENVIRONMENT
General economic environment
The global economy grew by 3.7 % in 2018, similar to
the previous year. Despite political uncertainties, all
regions saw economic growth, albeit with varying
degrees of strength. While momentum slowed in
Europe and China, economic output in the USA grew
at a significantly faster pace than in 2017, thereby bol-
stering the growth of global gross domestic product.
The eurozone economy continued to grow. At around
1.9 %, however, the increase was below the previous
year’s rate. Key economies in the region remained
on growth course, with economic output up in
Germany (+ 1.5 %), France (+ 1.6 %), Italy (+ 1.0 %) and
Spain (+ 2.5 %). Increased investment activity, rising
exports and robust domestic demand from both
private consumers and the state contributed to the
positive economic development. Within this favoura-
ble environment, the unemployment rate continued to
fall and is now at its lowest level since 2008. As a result
of the related rise in inflation, the European Central
Bank (ECB) decided to phase out its securities purchase
programme by December 2018 and to reinvest only
principal repayments from maturing securities.
Economic performance in the United Kingdom was
dominated by continuing uncertainty regarding the
terms of Brexit and hence the country’s future relation-
ship with the EU. Despite a further slight decline in
the unemployment rate, private consumer sentiment
declined further. Similarly, the public sector had only
a limited degree of leverage to counter the overall
slowdown in market momentum. As a consequence,
economic growth in the reporting period slowed for
the fourth year in succession to stand at 1.3 %. The
situation was exacerbated by the Bank of England
raising its benchmark interest rates in an attempt to
hold down price inflation.
Combined Management Report 41
with the growth rate almost halved compared to one
year earlier. The export sector slowed down in 2018
after a strong previous year.
Emerging markets remained on a stable growth course
with GDP up overall against the previous year, includ-
ing rises in Russia (+ 2.3 %), Brazil (+ 1.3 %) and India
(+ 7.3 %). The upward trend in Russia was driven
by a number of sectors. Investment and industrial
production increased markedly. Domestic consumer
spending was at a similar level to the previous year.
The positive trend benefited from a further drop
in unemployment. Economic recovery in Brazil
remained sluggish. Although private consumer
spending developed positively in 2018, the country’s
high unemployment rate was only reduced slightly.
Government spending also increased. The Indian
economy grew at a steady rate. Apart from strong
growth in private spending, the manufacturing sector
also made a positive contribution.
Currency markets
The US dollar / euro exchange rate fluctuated between
1.13 and 1.25 US dollars to the euro during 2018, fin-
i sh ing the twelve-month period at an average rate of
1.18 US dollars to the euro. As previously announced,
the US Federal Reserve continued to raise key interest
rates during the period under report. With effect
from the end of the year, the ECB discontinued its
purchases of securities, sending out the first clear
signals that its highly expansionary monetary policy
is coming to an end.
GDP in the USA rose for the ninth consecutive year in
2018, growing by 2.9 % on the back of strong domestic
demand. Alongside increased household spending
encouraged by the tax reform, government-related
demand also increased considerably. Consumer
sentiment within private households was shored
up by a historically low unemployment rate of less
than 4 % and rising wages. Corporate investments
and industrial production also grew robustly. Strong
economic growth combined with an inflation rate of
2.4 % provided impetus for the Fed to raise interest
rates over the course of 2018.
Economic growth in China came in at 6.6 % in 2018,
slightly down on the previous year. Demand from
private households remained at a similarly high
level to previous years. By contrast, the willingness
of companies to invest fell significantly, reflected in
a growth rate of only 5.9 % in 2018. This outcome
was a desired development and in line with the gov-
ernment’s intended transformation of the Chinese
economy to one of sustainable economic growth and
greater financial market stability. Over the course of
the year, however, tariff increases imposed by the USA
on Chinese products exacerbated the factors holding
down the domestic economy, causing the Chinese
government to undertake fiscal measures to prevent
the economy from slowing too quickly.
In Japan, the growth rate for 2018 fell sharply to 0.8 %,
mainly due to a significant decline in private consumer
spending. In addition, various natural catastrophes
temporarily curtailed production. Furthermore,
demand for capital goods only increased moderately,
Exchange rates compared to the euro
• 19
Index: December 2013 = 100
Russian Rouble
British Pound
Chinese Renminbi
Japanese Yen
US Dollar
200
150
100
50
2014
2015
2016
2017
2018
2019
200
150
100
50
Source: Reuters.
42
Report on
Economic Position
General and Sector-
specific Environment
The British pound’s fluctuations against the euro
reflected the progress of difficult negotiations towards
an orderly Brexit. The value of the British currency fell
temporarily to 0.91 pounds to the euro before finishing
the year at an average rate of 0.89 pounds to the euro.
The Chinese renminbi continued to lose value com-
pared to the previous year, recording an average
exchange rate of 7.81 renminbi to the euro for the
twelve-month period. The Japanese yen also continued
to depreciate year-on-year with an average exchange
rate of 130 yen to the euro during the year under
report.
The currencies of major emerging economies fell
during 2018. The Russian rouble and the Brazilian
real lost 12 % and 20 % respectively against the euro.
The Indian rupee depreciated by 10 % against the euro.
Oil price trend
• 20
Price per barrel of Brent Crude
150
100
50
0
Source: Reuters.
Price in US Dollar
Price in €
2014
2015
2016
2017
2018
2019
Precious metals price trend
• 21
Price in US Dollar
1,800
1,200
600
100
Source: Reuters.
Gold
Palladium
Platinum
2014
2015
2016
2017
2018
2019
150
100
50
0
1,800
1,200
600
100
Combined Management Report 43
International automobile markets
The upward trend of the previous years on inter-
national automotive markets failed to continue in
2018, with registration figures for passenger cars and
light commercial vehicles falling worldwide by 2.2 %
to 85.8 million vehicles. New registration figures
fell for the first time in years in China (23.1 mil-
lion units; – 6.3 %) and were flat in both the USA
(17.3 million units; + 0.3 %) and Japan (5.1 million
units; + 0.7 %).
Overall, European automobile markets finished at
the previous year’s level (15.6 million units; 0.0 %). A
look at individual markets, however, shows a mixed
picture for registrations. While Spain (1.3 million
units; + 7.0 %) and France (2.2 million units; + 3.0 %)
again saw year-on-year growth, new registrations were
down in Italy (1.9 million units; – 3.3 %) and Germany
(3.4 million units; – 0.2 %). The automobile market in
the UK continues to suffer from uncertainties related
to the progress of Brexit, with registrations down by
6.8 % to 2.4 million units.
Vehicle registrations in major emerging markets rose
for the second year in succession in 2018. Russia
recorded growth of 10.3 % to 1.6 million units. New
registrations in Brazil went up by 12.1 % (2.1 million
units).
International motorcycle markets
Motorcycle markets in the 250 cc plus class generally
performed well during 2018. The number of new
registrations worldwide increased 3.1 % year-on-year.
European markets in particular developed well, grow-
ing at an overall rate of 7.4 %. Germany registered
growth of 8.6 %. Increases in new registrations were
also recorded in Italy (+ 6.3 %) and Spain (+ 16.3 %).
The French motorcycle market was 6.0 % up on the
previous year. The US market continued to perform
weakly and contracted by 4.5 %.
Energy and raw materials prices
Steel markets experienced some sharp price rises
during 2018, especially in the USA. The US Admin-
istration increased tariffs on steel by 25 %, making
this particular raw material more expensive for the
domestic market. In addition, the price of coking coal
went up by around 10 %. Moreover, both the USA and
the EU continued to apply protectionist measures on
steel products from various countries.
Prices for precious and non-ferrous metals fell mar-
kedly overall towards the end of 2018. Only palladium,
which is mainly used in petrol engines, saw a price
increase.
Prices for lithium and cobalt, which are used as raw
materials in batteries, were highly volatile during 2018.
Whereas multi-year highs were still being recorded in
the first half of the year, prices fell sharply during the
second six-month period.
On oil markets, concerns regarding a state bank-
ruptcy in Venezuela and the reintroduction of export
sanctions against Iran fuelled fears of a possible
under-supply. Overall, the average price per barrel
rose significantly from 54 US dollars to 72 US dollars
year-on-year. WTI, the benchmark for crude oil in the
USA, followed a similar trend, with an average price of
around 65 US dollars per barrel for the year as a whole.
Steel price trend
• 22
Index: January 2014 = 100
140
100
60
2014
2015
2016
2017
2018
2019
Source: Working Group for the Iron and Metal Processing Industry.
OVERALL ASSESSMENT
BY MANAGEMENT
Overall assessment of business performance
Despite challenging conditions and volatility on
international markets, the BMW Group can look
back on an overall positive business performance
in 2018. Despite some downward trends in figures
in the past financial year, the BMW Group’s results
of operations, financial position and net assets are all
indicative of the enterprise’s solid financial condition.
Overall, despite the various economic challenges,
business developed in line with management’s
revised expectations. This assessment also takes into
account events after the end of the reporting period.
44
Report on
Economic Position
General and Sector-
specific Environment
Overall Assessment
by Management
Comparison of
Forecasts for 2018
with Actual Results
in 2018
International interest rate environment and
development of pre-owned vehicle prices
The global economy continued to grow robustly in
2018. With the exception of the Fed, major central
banks supported this development with their con-
tinued expansionary approach.
The ECB’s policy of monetary expansion remained
largely unchanged. The volume of bond purchases
was reduced from € 30 billion to € 15 billion in Octo-
ber 2018 and the purchase programme definitively
ended with effect from the end of the year.
After a weak first six-month period, the UK economy
recorded stronger-than-expected growth during the
second half of 2018. In August, the Bank of England
(BoE) decided to raise key interest rates in view of solid
growth figures and to counter inflationary pressures.
Despite the trade dispute with China, the US Federal
Reserve maintained its strategy of normalising mon-
etary policy during 2018. Over the course of the year,
it resolved on four occasions to raise the benchmark
interest rate, in each case by 0.25 %, taking it to a
range of 2.25 – 2.50 %.
The Chinese economy lost a certain amount of
momentum in 2018. Despite the trade dispute with
the USA, the People’s Bank of China (PBOC) retained
its interest rate policy and left the benchmark interest
rate unchanged.
The pace of economic growth in Japan slowed during
2018, partly due to the numerous natural disasters.
With inflation well below the target rate of 2 %, the
Japanese central bank decided to retain its highly
expansionary monetary policy.
In some European countries, in particular Germany
and to some extent in Southern Europe, diesel
engines were the subject of political debate in 2018.
In Germany, the first driving bans were imposed on
older diesel vehicles. Although markets for pre-owned
cars in the premium segment reacted across the board
with price decreases for diesels, only a small number
of the affected vehicles remain in the BMW Group’s
portfolio. By contrast, prices for petrol vehicles in the
premium segment remained stable.
In the UK, the market for pre-owned premium vehicles
was slightly down on previous years. North American
markets developed positively. So far, markets in Asia
have been largely unaffected by discussions about
types of engine.
Combined Management Report COMPARISON OF
FORECASTS FOR 2018
WITH ACTUAL RESULTS
IN 2018
The following section provides information on the key
financial and non-financial performance indicators
for the Group and its segments, which is used as the
basis for the internal management of the BMW Group.
As part of the analysis of operations and the financial
condition of the BMW Group, forecasts made the pre-
vious year for the financial year 2018 are compared
with the actual outcomes in 2018.
In an ad hoc announcement issued on 25 Septem-
ber 2018, the BMW Group reported on its decision to
revise its forecast for the financial year 2018 in light
of a new assessment. The main reasons given for the
revision are stated below:
— The BMW Group implemented the requirements
of the WLTP regulations at an early stage. How-
ever, the industry-wide shift to the new WLTP
test cycle resulted in significant supply distor-
tions on several European markets and un expect-
edly intense competition. In line with its flexible
production and sales strategy, the BMW Group
responded to these circumstances by reducing
its volume planning with a clear focus on earn-
ings quality.
— Increased goodwill and warranty measures re-
sulted in significantly higher additions to provi-
sions in the Automotive segment.
— In addition, continuing international trade con-
flicts were aggravating the market situation and
feeding uncertainty. These circumstances resulted
in greater-than-expected distortions in demand
and unexpected pressure on pricing in several
markets.
* Prior year figures
have been
adjusted due to
the first-time
application of
IFRS 15, see
note 6 to the
Group Financial
Statements.
45
Against this background, the BMW Group adjusted its
outlook for the financial year 2018 as follows:
— In the Automotive segment, revenues are fore-
cast to be slightly lower than the previous year
(previously: slight year-on-year increase).
— The EBIT margin in the Automotive segment is
expected to be at least 7 % (previously: 8 to
10 %).
— Group profit before tax is expected to show a
moderate year-on-year decrease (previously:
in line with the previous year).
These circumstances had a significant impact on
Group profit before tax and the EBIT margin of the
Automotive segment both in the third quarter and in
the fourth quarter.
The BMW Group remains fully committed to its goal
of spearheading the transformation of the industry. It
continues to strive for sustained high profitability as
the cornerstone of its Strategy NUMBER ONE > NEXT.
In addition to continuing the current product roll-
out, ongoing cost and efficiency measures will also
be intensified.
Group
Profit before tax: moderate decrease
At € 9,815 million, Group profit before tax in 2018
was the second-best figure in the company’s history
and moderately down on the previous year’s record
level (2017: € 10,675* million; – 8.1 %). In the Annu-
al Report 2017 it was expected that profit before
tax would remain at the previous year’s level. The
factors described above had a dampening effect on
the BMW Group’s earnings performance during the
twelve-month period under report.
Group profit before tax fell moderately and was thus
in line with adjusted expectations, as revised in the
Quarterly Report to 30 September 2018.
Workforce at year-end: slight increase
In the period under report, the size of the workforce
increased slightly by 3.7 % to 134,682 employees (2017:
129,932 employees). Projects relating to vehicle elec-
trification and autonomous driving were the main
reason for the workforce increase. Operating growth
at segment level and the expansion of financial and
mobility services also contributed to the higher
headcount.
As foreseen in the outlook for the financial year 2018,
there was a slight increase in the size of the workforce,
which was thus in line with expectations.
46
Report on
Economic Position
Comparison of
Forecasts for 2018
with Actual Results
in 2018
Automotive segment
Deliveries to customers: slight increase
In 2018, the BMW Group delivered a record num-
ber of vehicles to customers for the eighth year in
succession. Despite significant ongoing political
and economic uncertainties due to trade disputes,
regulatory requirements and the unclear outcome of
the Brexit negotiations, deliveries of BMW, MINI and
Rolls-Royce brand vehicles worldwide increased slight-
ly by 1.1 % to 2,490,664 1 units (2017: 2,463,526 1 units).
Favourable market conditions in Asia had a positive
impact on automobile deliveries. In Europe, volume
figures matched the previous year’s high level despite
fewer deliveries in the UK and Italy. In the Americas
region, the BMW Group recorded a slight increase in
the number of deliveries.
3 Prior year figures
have been
adjusted due to
the first-time
application of
IFRS 15, see
note 6 to the
Group Financial
Statements.
1 Including the
joint venture
BMW Brilliance
Automotive Ltd.,
Shenyang
(2018: 459,581
units, 2017:
384,124 units).
Deliveries of the core BMW brand in 2018 totalled
2,125,026 1 units (2017: 2,088,283 1 units; + 1.8 %),
thereby setting a new volume record. MINI remained
slightly below the previous year’s record figure and,
with 361,531 units, achieved its second highest num-
ber of deliveries to date (2017: 371,881 units; – 2.8 %).
Rolls-Royce Motor Cars achieved a new record level
of 4,107 units (2017: 3,362 units; + 22.2 %).
As foreseen in the outlook for the financial year 2018,
Automotive segment deliveries increased slightly and
were therefore in line with expectations.
2 EU-28.
Fleet carbon dioxide (CO2) emissions 2:
in line with previous year’s level
CO2 emissions from fleet vehicles delivered in Europe
in 2018 amounted to 128 g CO2 / km (adjusted value
for 2017: 128 g CO2 / km; 0.0 %) and were therefore in
line with the previous year. This was achieved despite
a further decline in the share of diesel vehicles and
also thanks to the significant growth in deliveries of
electrified models. The original forecast had foreseen
a slight decrease.
Revenues: in line with previous year’s level
At € 85,846 million, segment revenues were in line
with the previous year’s level (2017: € 85,742 3 million;
+ 0.1 %), whereby the translation of foreign currencies
had a negative impact, particularly in the first quarter.
The various adverse factors described above also held
down revenues.
In the Quarterly Report to 30 September 2018, the
original forecast for segment revenues was revised
from a slight increase to a slight decrease. Thanks
to the slightly higher number of vehicles delivered,
actual revenues were in line with the previous year’s
level and therefore exceeded the most recent forecast.
Going forward, the BMW Group intends to place
greater emphasis on the quality of earnings in its
management of the business. Given that the EBIT
margin already takes account of revenues, segment
revenues will no longer be reported as one of the key
performance indicators going forward.
EBIT margin: at least 7%
The EBIT margin (profit before financial result divided
by revenues) came in at 7.2 % (2017: 9.2 3 %; – 2.0 per-
centage points). As forecast in the Quarterly Report
to 30 September 2018, the EBIT margin exceeded 7 %
and was therefore in line with revised expectations. In
the Annual Report 2017 an EBIT margin in the range
of 8 to 10 % was originally expected.
Return on capital employed: significant decrease
The Automobile segment’s RoCE in 2018 fell to 49.8 %
(2017: 77.7 3 %; – 27.9 percentage points), mainly
reflecting earnings developments. The main reasons
for the decrease were higher investments in the
electrification of the BMW Group’s vehicle fleet,
digitalisation and the expansion and rejuvenation of
the model portfolio as well as the expansion of the
production network. However, the long-term target
RoCE for the Automotive segment was well above the
minimum target of 26 %.
As foreseen in the outlook for the financial year
2018, the RoCE decreased significantly, in line with
expectations.
Combined Management Report 47
Motorcycles segment
Deliveries to customers: in line with previous year’s level
In 2018, deliveries of motorcycles reached a new record
level of 165,566 units (2017: 164,153 units; + 0.9 %).
In the Quarterly Report to 31 March 2018, a slight
increase was forecast for the full twelve-month period.
Due to the limited availability of products in conjunc-
tion with various model changes, deliveries in 2018
were only in line with the previous year’s level. The
original forecast in the Annual Report 2017 expected
a solid increase in deliveries of motorcycles.
EBIT margin in target range of between 8 and 10%
The EBIT margin in the Motorcycles segment (profit
before financial result divided by revenues) came in
at 8.1 % (2017: 9.1 1 %; – 1.0 percentage points). As
foreseen for the financial year 2018, the EBIT margin
was within the target range of between 8 and 10 % and
therefore in line with expectations.
Return on capital employed: moderate decrease
The return on capital employed (RoCE) for the Motor-
cycles segment in 2018 was 28.4 %, moderately down
on the previous year’s level (2017: 34.0 1 %; – 5.6 per-
centage points). In the original forecast in the Annual
Report 2017, a slight increase was expected. The most
recent forecast in the Quarterly Report to 30 Septem-
ber 2018 still assumed that RoCE would be in line with
the previous year’s level. The shortfall was attributable
to the ramp-up situation in the segment due to various
model changes. The long-term target RoCE of 26 % for
the Motorcycles segment was surpassed.
Financial Services segment
Return on equity slightly below previous year’s level
As expected in the Annual Report 2017, the return on
equity generated by the Financial Services segment in
2018 was slightly lower than one year earlier at 14.8 %
(2017: 18.1 %; – 3.3 percentage points). The decrease
was due to more stringent regulatory requirements for
equity capital. Nevertheless, the internal RoE target
of at least 14 % was achieved.
The key performance indicators of the BMW Group
and its segments can be summarised as below.
BMW Group comparison of 2018 forecasts with actual outcomes 2018
• 23
Forecast for 2018
in 2017 Annual Report
Forecast revision
during the year
Actual outcome
in 2018
Group
Profit before tax
in line with last year’s level
Q3: moderate decrease
€ million
Workforce at year-end
slight increase
9,815 (– 8.1 %)
moderate decrease
134,682 (+ 3.7 %)
slight increase
slight increase
slight decrease
units
2,490,664 (+ 1.1 %)
slight increase
g CO2 / km
slight increase
Q3: slight decrease
€ million
Return on capital employed
significant decrease
between 8 and 10
Q3: at least 7
Automotive seGment
Deliveries to customers 2
Fleet emissions 3
Revenues
EBIT margin
motorcycles seGment
Deliveries to customers
EBIT margin
Return on capital employed
solid increase
Q1: slight increase
units
between 8 and 10
slight increase
Q1: in line with last
year’s level
FinAnciAl services seGment
Return on equity
slight decrease
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2018: 459,581 units).
3 EU-28.
128 (0.0 %)
in line with last
year’s level
85,846 (+ 0.1 %)
in line with last
year’s level
7.2 (– 2.0 %pts)
49.8 (– 27.9 %pts)
significant decrease
165,566 (+ 0.9 %)
in line with last
year’s level
8.1 (– 1.0 %pts)
28.4 (– 5.6 %pts)
moderate decrease
14.8 (– 3.3 %pts)
slight decrease
%
%
%
%
%
48
Report on
Economic Position
Review of Operations
Automotive Segment
REVIEW OF OPERATIONS
Automotive Segment
Deliveries rise to new record level
The BMW Group delivered 2,490,664* BMW, MINI and
Rolls-Royce brand vehicles worldwide in 2018, thereby
setting a new record for the eighth year in succession
(2017: 2,463,526* units; + 1.1 %), comprising 2,125,026*
BMW (2017: 2,088,283* units; + 1.8 %), 361,531 MINI
(2017: 371,881 units; – 2.8 %) and 4,107 Rolls-Royce
(2017: 3,362 units; + 22.2 %) brand vehicles.
Asia and Americas slightly up, Europe at
previous year’s level
The BMW Group continued to grow its business in
Asia in 2018, recording a 3.3 % increase in deliveries
of BMW, MINI and Rolls-Royce brand vehicles to a
total of 876,614* units (2017: 848,826* units). In China,
sales figures developed positively, mainly due to a
strong second half-year, rising to 640,803* units (2017:
595,020* units; + 7.7 %).
In Europe, the BMW Group’s sales performance
was dampened by various factors, including the
diesel debate in some countries. Nevertheless, with
deliveries of 1,098,523 units of its three brands, the
BMW Group came very close to the previous year’s
BMW Group deliveries of vehicles by region and market
• 25
high level (2017: 1,101,760 units; – 0.3 %). Deliveries in
Germany increased by 4.9 % to 310,441 units (2017:
295,805 units). In the UK, volumes fell slightly year-
on-year to 238,308 units (2017: 241,674 units; – 1.4 %),
not least due to the ongoing uncertainty about the
outcome of the Brexit negotiations.
On the American continent, market conditions were
characterised by intense competition and fluctuations
in demand, in some cases on a high scale. Nevertheless,
the BMW Group increased deliveries in the region by
1.5 % to 457,715 units (2017: 451,136 units). Business
in the USA remained at the previous year’s level, with
355,993 units delivered (2017: 353,819 units; + 0.6 %).
BMW Group – key automobile markets 2018
• 24
as a percentage of deliveries
Other 28.3
Japan 3.1
Italy 3.1
France 3.5
UK 9.6
25.7 China
14.2 USA
12.5 Germany
in 1,000 units
Europe
thereof Germany
thereof UK
Americas
thereof USA
Asia*
thereof China*
Other markets
Total*
2018
2017
2016
2015
2014
1,098.5
1,101.8
1,092.2
1,000.4
310.4
238.3
457.7
356.0
876.6
640.8
57.9
295.8
241.7
451.1
353.8
848.8
595.0
61.8
298.9
252.2
460.4
366.5
747.3
516.8
67.7
286.1
231.0
495.9
405.7
685.8
464.1
65.4
914.6
272.3
205.1
482.3
397.0
658.4
456.7
62.7
2,490.7
2,463.5
2,367.6
2,247.5
2,118.0
* Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2018: 459,581 units, 2017: 384,124 units, 2016: 316,200 units, 2015: 282,000 units, 2014: 275,891 units).
Combined Management Report BMW* deliveries rise to new record level
In 2018, BMW brand deliveries rose to 2,125,026 units
(2017: 2,088,283; + 1.8 %), reaching a new record high
for the eighth year in succession. The BMW 5 Series,
the BMW 6 Series and the X Family all made
major contributions to this result. Moreover, the
fleet of electrified vehicles is continually gaining
in significance.
At 199,980 units, deliveries of the BMW 1 Series
were almost at their previous year’s level (2017:
201,968 units; – 1.0 %). Now nearing the end of its
model life cycle, deliveries of the BMW 3 Series were
down on the previous year, in line with expectations
(366,475 units; 2017: 409,005 units; – 10.4 %). The new
BMW 3 Series Sedan celebrated its world première
in autumn 2018, amid great acclaim from customers
and media alike. Deliveries of the BMW 5 Series
Deliveries of BMW vehicles by model variant*
• 26
in units
BMW 1 Series
BMW 2 Series
BMW 3 Series
BMW 4 Series
BMW 5 Series
BMW 6 Series
BMW 7 Series
BMW 8 Series
BMW X1
BMW X2
BMW X3
BMW X4
BMW X5
BMW X6
BMW i
BMW total
* Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2018: 459,581 units, 2017: 384,124 units).
49
rose significantly by 10.2 % to 382,753 units (2017:
347,313 units). The BMW 6 Series benefited from the
new Gran Turismo model and achieved a volume of
26,606 units worldwide (2017: 11,052 units).
The BMW X family again enjoyed high demand
in 2018. Worldwide deliveries of 792,605 X units
represented a significant 12.1 % increase year-on-
year (2017: 706,741 units). The BMW X3 made an
important contribution to this performance, with
deliveries up by more than one third to 201,637 units
(2017: 146,395 units; + 37.7 %). Now coming to the
end of its life cycle, BMW X5 deliveries fell short
of the previous year, in line with expectations
(155,575 units; 2017: 180,905 units; – 14.0 %). The
successor to the X5 has been available since Novem-
ber 2018 and will generate additional impetus from
2019 onwards.
2018
2017
Change in %
Proportion of
BMW sales volume
2018 in %
199,980
152,215
366,475
109,887
382,753
26,606
56,037
923
286,827
67,576
201,637
45,950
155,575
35,040
37,545
201,968
181,113
409,005
133,104
347,313
11,052
64,311
–
286,743
–
146,395
52,167
180,905
40,531
33,676
2,125,026
2,088,283
– 1.0
– 16.0
– 10.4
– 17.4
10.2
–
– 12.9
–
0.0
–
37.7
– 11.9
– 14.0
– 13.5
11.5
1.8
9.4
7.2
17.2
5.2
18.0
1.3
2.6
–
13.5
3.2
9.5
2.2
7.3
1.6
1.8
100.0
50
Combined
Management
Report
Report on
Economic Position
Review of Operations
Automotive Segment
MINI achieves second-best year
2018 was the second-best year in MINI’s history.
Worldwide deliveries totalled 361,531 units (2017:
371,881 units; – 2.8 %). Deliveries of the MINI Countryman
increased by almost one fifth to 99,750 units (2017:
84,888 units; + 17.5 %). The MINI Hatch (3- and 5-door)
achieved a volume of 182,189 units (2017: 194,070
units; – 6.1 %).
Deliveries of MINI vehicles by model variant
• 27
in units
MINI Hatch (3- and 5-door)
MINI Convertible
MINI Clubman
MINI Countryman
MINI total
Rolls-Royce with record deliveries
In 2018, Rolls-Royce Motor Cars marked its best year
in over 100 years of corporate history with 4,107 deliv-
eries worldwide (2017: 3,362 units; + 22.2 %). The
Rolls-Royce Phantom* (830 units; 2017: 235 units)
and the new Rolls-Royce Cullinan* (544 units), the
latter of which has been available to customers since
November 2018, contributed substantially to this
performance.
Deliveries of Rolls-Royce vehicles
by model variant
• 28
in units
2018
2017
Change in %
Phantom*
Ghost
Wraith / Dawn
Cullinan*
Rolls-Royce total
830
958
1,775
544
4,107
235
1,098
2,029
–
3,362
–
– 12.8
– 12.5
–
22.2
2018
2017
Change in %
Proportion of
MINI sales volume
2018 in %
182,189
194,070
32,356
47,236
99,750
33,351
59,572
84,888
361,531
371,881
– 6.1
– 3.0
– 20.7
17.5
– 2.8
50.4
8.9
13.1
27.6
100.0
Delivery target of 140,000 electrified automobiles
achieved
The BMW Group succeeded in reaching its target of
delivering more than 140,000 electrified vehicles in
the financial year 2018, underlining its leading posi-
tion worldwide in terms of combined deliveries of
all-electric and plug-in hybrid vehicles and as market
leader in Europe.
With a total of 142,617 units, deliveries of BMW Group
electrified vehicles rose by more than a third in 2018
(2017: 103,080 units; + 38.4 %). Deliveries of BMW i
and BMW plug-in hybrid models increased by one
third to 129,398 units in the year under report (2017:
97,281 units; + 33.0 %). With a total of 91,853 units,
BMW plug-in hybrids made an important contribu-
tion to this performance (2017: 63,605 units; + 44.4 %).
Deliveries of the electrified MINI Countryman*, avail-
able since June 2017, totalled 13,219 units during the
year under report (2017: 5,799 units).
Deliveries of electrified models
• 29
in units
BMW i
BMW iPerformance
MINI Electric
Total
2018
2017
Change in %
37,545
91,853
13,219
33,676
63,605
5,799
142,617
103,080
11.5
44.4
–
38.4
* Fuel consumption and CO2 emissions information are available on page 108.
Production reaches new all-time high
A new production volume record of 2,541,534 1 units
(2017: 2,505,741 1 units; + 1.4 %) was set during the
year under report, comprising 2,168,496 1 BMW
(2017: 2,123,947 1 units; + 2.1 %), 368,685 MINI (2017:
378,486 units; – 2.6 %) and 4,353 Rolls-Royce brand
vehicles (2017: 3,308 units; + 31.6 %).
51
Vehicle production of the BMW Group by plant
• 30
in units
Spartanburg
Dingolfing
Regensburg
Leipzig
Oxford
Munich
Rosslyn
Rayong
Chennai
Araquari
Goodwood
San Luis Potosí 2
Tiexi (BBA) 3
Dadong (BBA) 3
Born (VDL Nedcar) 4
Graz (Magna Steyr) 4
Partner plants
Group
2018
2017
Change in %
Proportion of
production in %
356,749
328,862
319,592
244,248
234,501
157,799
50,224
15,612
10,956
7,752
4,353
308
299,939
191,888
211,660
64,431
42,660
371,316
376,580
338,259
246,043
223,817
196,455
53,105
21,084
8,952
12,768
3,308
–
269,309
127,440
168,969
50,272
38,064
2,541,534
2,505,741
– 3.9
– 12.7
– 5.5
– 0.7
4.8
– 19.7
– 5.4
– 26.0
22.4
– 39.3
31.6
–
11.4
50.6
25.3
28.2
12.1
1.4
14.0
12.9
12.7
9.6
9.2
6.2
2.0
0.6
0.4
0.3
0.2
–
11.8
7.6
8.3
2.5
1.7
100.0
1 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2018: 491,872 units, 2017: 396,749 units).
2 2018 only pre-series production, plant opens in 2019.
3 Joint Venture BMW Brilliance Automotive Ltd., Shenyang.
4 Contract production.
To ensure full capacity utilisation of its production
network in the long term and to be capable of
responding rapidly and flexibly to changing customer
requirements, the BMW Group pursues the strategy of
integrating the production of all-electric and plug-in
hybrid vehicles in its existing manufacturing system.
In 2018, the Group produced electrified vehicles at
ten different locations worldwide. In the future, every
BMW Group production plant in Europe will also
manufacture electrified vehicles.
The BMW Group’s production system is based on
the Strategy NUMBER ONE > NEXT and is ideally
prepared for the future. The system is characterised
by unique flexibility, outstanding efficiency and
robust processes, enabling the BMW Group to
respond rapidly to changing market situations
and fluctuations in regional demand. This level of
manufacturing expertise gives the Group a crucial
competitive edge and makes a key contribution to
its overall profitability.
Its production network leverages innovative technolo-
gies from the fields of digitalisation and Industry 4.0,
standardised modules and intelligent mixed manu-
facturing methods. The production system ensures
consistent premium quality and enables a high level
of customisation for customers. MINI buyers, for
example, can optionally design selected components
to suit their individual tastes.
International production network
By expanding its international production network,
the BMW Group follows global market developments
with the aim of ensuring a balanced distribution of
added value. In 2018, the Group announced the
construction of a new plant in Hungary in order to
increase capacity in its global production network in
the long term.
In 2018, the Group’s largest plant in Spartanburg
(USA) began producing the first BMW X7 and the
new BMW X4 and BMW X5 models. The plant, which
specialises in the BMW X Series ranging from the X3
to the X7, produces a total of five different models for
the world market.
Due to the high global demand for these models,
the plants in Dadong (China) and Rosslyn (South
Africa) have also been producing the BMW X3 since
2018. Previously, the Rosslyn plant had produced the
BMW 3 Series for over 35 years. The new BMW Group
plant in San Luis Potosí (Mexico) will take over these
capacities going forward. The first BMW 3 Series
Sedans have already been successfully produced there
as pre-series models. The plant in Mexico is due to be
officially opened in mid-2019.
In 2018, the BMW Group celebrated the 15th an niver-
sary of the successful BMW Brilliance Automotive
(BBA) joint venture in Shenyang (China). A total of six
BMW models are manufactured at the two BBA plants
in Dadong and Tiexi. The BMW X2 will become the
seventh model in 2019.
52
Report on
Economic Position
Review of Operations
Automotive Segment
Motorcycles
Segment
German plants play leading role within network
Overall, the Group’s German manufacturing plants
in Munich, Dingolfing, Regensburg and Leipzig again
produced over one million vehicles in 2018.
At the same time, important innovations are being
further developed and tested at these plants. Moreover,
they are playing a key role in integrating e-mobility
throughout the BMW Group’s production network.
In 2018 alone, more than € 1 billion were invested in
the Group’s German production sites for continu-
ous modernisation projects and to prepare them for
electric mobility.
The technologies used in making electric drivetrain
components and batteries are developed at the proto-
type construction centre in Munich. The Dingolfing
and Landshut plants play a leading role as centres of
competence for the production of electric drivetrain
systems. Electric motors for the BMW Group’s elec-
trified vehicles are also produced at these plants. The
batteries required are produced at the three battery
factories in Dingolfing (Germany), Spartanburg (USA)
and Shenyang (China). In Thailand, the BMW Group
works closely with a partner that manufactures bat-
teries for electrified vehicles produced locally.
The ability to produce electric drivetrain systems,
batteries and prototypes for battery cells in-house
gives the BMW Group a decisive competitive edge
that enables it to secure valuable knowledge of new
technologies, gain important system expertise and
leverage cost advantages.
In the future, the Group intends to concentrate its
battery cell expertise in an in-house competence cen-
tre. The aim is to continue developing the technology
and to fully analyse and understand the value-added
processes of the battery cell. The competence centre
is due to be opened in 2019.
Worldwide network for conventional drivetrain
production
The engine manufacturing plants in Munich, Hams
Hall (UK), Steyr (Austria) and Shenyang (China) sup-
ply both diesel and petrol engines for the production
network. The BMW Group’s largest engine plant in
Steyr also serves as the development centre for diesel
engines worldwide. In Steyr, more than 700 techni-
cians and engineers are working on making the drive-
trains of the future generate even fewer emissions and
operate more efficiently and powerfully with the help
of state-of-the-art testing and measuring technology.
Combined Management Report BMW Group deliveries of motorcycles
• 31
in 1,000 units
53
164.2
165.6
137.0
145.0
123.5
180
90
0
2014
2015
2016
2017
2018
BMW Group – key motorcycle markets 2018
• 32
as a percentage of sales volume
Other 46.5
UK 5.5
14.4 Germany
10.0 France
8.5 Italy
8.4 USA
6.7 Spain
Motorcycles Segment
Motorcycle deliveries increase
Deliveries of motorcycles reached a new record level
of 165,566 units in 2018 (2017: 164,153 units; + 0.9 %),
marking the eighth successive year of growth.
Effect of model change felt particularly in Europe
The model change in the mid-class segment had a
particularly significant impact on the European mar-
ket, causing motorcycle deliveries to fall slightly by
3.3 % to 98,144 units in 2018 (2017: 101,524 units). At
23,824 units, deliveries to customers in Germany were
down year-on-year (2017: 26,664 units; – 10.7 %).
Italy saw a slight decrease, with deliveries falling to
14,110 units (2017: 14,430 units; – 2.2 %). By contrast,
volumes remained similar to the previous year’s level
in Spain (11,124 units; 2017: 11,193 units; – 0.6 %)
and France (16,615 units; 2017: 16,607 units; 0.0 %).
In the USA, BMW Motorrad reported a slight increase
of 2.2 % to 13,842 units despite difficult market con-
ditions (2017: 13,546 units).
Motorcycle production down year-on-year due to
model changes
A total of 162,687 motorcycles rolled off BMW Motor-
rad’s production lines at five locations during the year
under report (2017: 185,682 units; – 12.4 %). Since
July 2018, BMW Motorrad scooters have also been
manufactured by BMW Motorrad’s partner Loncin
Motor Co., Ltd in Chongqing, China.
Eight new models introduced
BMW Motorrad presented a total of eight new models
at the international motorcycle trade shows in Cologne
(INTERMOT) and Milan (EICMA), comprising the
R 1250 GS, R 1250 GS Adventure, R 1250 RT, R 1250 R,
R 1250 RS, C 400 GT, F 850 GS Adv. and S 1000 RR. In
the case of the third generation of the S 1000 RR, BMW
Motorrad’s customers can now select a BMW M package
for the first time. The R 1250 models are also equipped
with new engines that generate more power, especially
at lower speeds, and help improve energy efficiency.
Slight growth in new business
Credit financing and leasing business with retail
customers remain key elements in the success of the
Financial Services segment. During the period under
report, 1,908,640 new credit financing and leasing
contracts were concluded with customers, slightly
up (+ 4.4 %) on the previous year (2017: 1,828,604
contracts). A slight increase in new contracts was
recorded for both credit financing (+ 4.3 %) and leasing
business (+ 4.5 %). Overall, leasing accounted for 33.1 %
and credit financing for 66.9 % of new business.
The proportion of new BMW Group vehicles either
leased or financed by the Financial Services segment
in the financial year 2018 amounted to 50.0 %, 3.2 per-
centage points up on the previous year (2017: 46.8 %)*,
mainly due to growth in credit financing in China.
In the pre-owned financing and leasing business
for BMW and MINI, the segment recorded a slight
increase in the number of new contracts signed in the
period under report, up by 2.2 % to 396,610 contracts
(2017: 387,937 contracts).
The total volume of new credit financing and leasing
contracts concluded with retail customers during
the twelve-month period under report amounted to
€ 55,817 million, slightly higher than one year earlier
(2017: € 55,049 million; + 1.4 %) and despite negative
exchange rate effects.
54
Report on
Economic Position
Review of Operations
Financial Services
Segment
Financial Services Segment
Continued growth for Financial Services
As in the previous year, the Financial Services segment
continued to perform very well within a highly com-
petitive market environment and therefore remained
firmly on growth course. In balance sheet terms, busi-
ness volume grew by 6.8 % to stand at € 133,210 mil-
lion (2017: € 124,719 million). The contract portfolio
under management at 31 December 2018 comprised
5,708,032 contracts and therefore grew solidly by 6.1 %
year-on-year (2017: 5,380,785 contracts).
Contract portfolio of
Financial Services segment
• 33
in 1,000 units
* The calculation
only includes
automobile mar-
kets in which the
Financial Services
segment is repre-
sented by a con-
solidated entity.
5,115
5,381
5,708
4,719
4,360
6,000
3,000
0
2014
2015
2016
2017
2018
BMW Group new vehicles financed or
leased by Financial Services segment*
• 34
in %
60
46.3
49.6
46.8
50.0
41.7
30
Leasing 20.9
22.1
22.3
20.8
21.2
Financing 20.8
24.2
27.3
26.0
28.8
0
2014
2015
2016
2017
2018
* Until 2015 excluding Rolls-Royce.
Combined Management Report 55
Decrease in multi-brand financing
Multi-brand financing in the Financial Services seg-
ment registered a significant drop (– 13.5 %) in new
business in 2018, with the number of new contracts
falling to 136,283 contracts (2017: 157,626 contracts).
The total portfolio comprised 401,007 contracts at
31 December 2018, slightly lower than one year earlier
(2017: 406,813 contracts; – 1.4 %). The reason for the
decline was a stronger focus on the Group’s own
brands within this line of business.
Solid year-on-year growth in dealership financing
The total volume of dealership financing continued
to grow during the financial year 2018, standing at
€ 20,438 million at the end of the reporting period
(2017: € 19,161 million; + 6.7 %).
Deposit business volume up on previous year
Customer deposits represent an important source of
refinancing for the Financial Services segment. The
volume of deposits stood at € 14,359 million at the end
of the reporting period, representing a solid increase
over one year earlier (2017: € 13,572 million; + 5.8 %).
Growth in insurance brokerage business
With an increase of 3.2 % in 2018, the number of
newly brokered insurance contracts grew to 1,381,093
contracts (2017: 1,337,652 contracts). At 31 Decem-
ber 2018, the total number of brokered insurance
contracts stood at 3,906,550 (2017: 3,649,362 con-
tracts; + 7.0 %).
The total portfolio of financing and leasing contracts
with retail customers developed positively again in
2018, with a solid increase of 6.3 % year-on-year. In
total, 5,235,207 contracts were in place with retail
customers at 31 December 2018 (2017: 4,926,228
contracts) in the Financial Services segment. The
China region recorded the fastest growth rate of all
regions, significantly growing its contract portfolio by
25.6 % year-on-year. The Europe / Middle East / Africa
region (+ 7.0 %), the EU Bank* region (+ 6.2 %) and
the Americas region (+ 2.2 %) also registered solid
or slight year-on-year growth respectively, whereas
the Asia / Pacific region saw a slight decrease in its
contract portfolio (– 2.5 %).
Contract portfolio retail customer financing
of Financial Services segment 2018
• 35
in % per region
Asia / Pacific 8.7
China 10.7
EU Bank* 21.1
32.8 Europe /
Middle East / Africa
26.7 Americas
* EU Bank comprises BMW Bank GmbH, its branches in Italy, Spain and Portugal, and its
subsidiary in France.
Slight growth in fleet business
The BMW Group is one of Europe’s foremost leasing
and full-service providers. The Financial Services
segment’s fleet management business, under the
brand name Alphabet, offers leasing and financing
arrangements as well as specific services to com-
mercial customers. The number of fleet contracts
rose by 3.0 % during the financial year 2018. At
31 December 2018, the segment was thus managing
a portfolio of 700,080 fleet contracts (2017: 679,895
contracts).
56
Report on
Economic Position
Review of Operations
Financial Services
Segment
Research and
Development
Risk profile
Despite ongoing political and economic uncertainties,
such as the diesel debate in European countries con-
cerning higher levels of emissions from diesel vehicles
as well as Brexit and trade conflicts, the risk profile
across the Financial Services segment’s total portfolio
remained stable at a low level.
Development of credit loss ratio
• 36
in %
0.5
0.25
0
0.50
0.37
0.32
0.34
0.25
2014
2015
2016
2017
2018
The risk profile of the segment’s credit financing port-
folio also remained stable at a low level. The credit
loss ratio on the total credit portfolio amounted to
0.25 % at 31 December 2018, and therefore below the
previous year’s level (2017: 0.34 %).
Proceeds generated from the sale of BMW and MINI
brand vehicles again rose slightly in the financial year
2018 due to volume and mix effects. Market values sta-
bilised in North America. By contrast, the European
pre-owned vehicle market experienced a downward
trend, in line with expectations, mainly in the wake
of the diesel engine debate.
Further information on the risk situation is provided
in the section Risks and Opportunities.
Combined Management Report 57
Substantial expansion of R&D activities in China
As part of its corporate strategy, the BMW Group
took a number of decisive steps in 2018 in the field of
research and development to secure the future of the
enterprise as a whole. China is playing an increasingly
significant role for the BMW Group as a driver of
innovation and future mobility.
Following the R&D centre in Shenyang, the BMW Group
opened a new location in Beijing in May 2018, where
topics such as requirements management, testing and
validation as well as the development of systems and
services are now handled. In June, the BMW Group
added a third location – Shanghai – to its Chinese
R&D network. The R&D centre in Shanghai will focus
on autonomous driving, digital services and futuristic
design and expand existing collaboration arrangements
with leading high-tech companies. The R&D team
comprises over 200 technical specialists and design-
ers. The two new locations are intended to bolster the
BMW Group’s local innovative strength in China.
Furthermore, in May 2018 the BMW Group became
the first international automotive manufacturer to
obtain a test licence for autonomous driving within
China. Level 4 functions (fully automated driving) are
being trialled by a test fleet comprising the latest mod-
els of the current BMW 7 Series on approximately six
kilometres of designated test routes in the Chinese city
of Shanghai. The development team, which is made
up of more than 60 experts, is currently collecting data
that reflect urban traffic in all its complexity. These
data will serve as the basis for developing machine
learning algorithms capable of depicting highly auto-
mated driving strategies.
Research and Development
www.bmwgroup.com / innovation
In 2018 the research and development division at the
BMW Group faced a series of challenges, which were
successfully met. Firstly, as part of the model offensive,
the Company developed new vehicles and vehicle
concepts. Secondly, it played a key role in advancing
the technologies that will drive tomorrow’s world,
such as autonomous driving, battery research and
electric mobility as well as software development
and connectivity. Moreover, the transition to the new
WLTP testing cycle was successfully completed during
the course of the year.
Autonomous Driving Campus working at full speed
In May 2018, the BMW Group celebrated the official
opening of its Autonomous Driving Campus in Unter-
schleißheim near Munich. On 23,000 square metres
of office space, the BMW Group is rapidly developing
state-of-the-art driver assistance systems as well as
highly and fully automated driving technology. The
campus has created many new jobs, particularly for
IT specialists and software developers in the fields
of artificial intelligence, machine learning and data
analysis.
At the end of 2018, around 1,300 experts from the
BMW Group as well as from external partners such as
Fiat Chrysler Automobiles, Intel and Mobileye were
already working in Unterschleißheim. On campus,
the associates actively practise an open, agile way of
working (Large Scale Scrum – LeSS), enabling the
teams to tackle the high complexity of their tasks more
quickly and with greater efficiency. This approach
enables the BMW Group to focus keenly on developing
new key technologies such as artificial intelligence
and driving simulation.
Driver assistance and autonomous driving continue to
play key roles in the BMW Group’s forward-oriented
strategy. During the year under report, a total of
80 vehicles were deployed to test the new technolo-
gies on highways and in urban environments across
Europe, the USA and China.
Regional mix of BMW Group
purchase volumes 2018
• 37
in %, basis: production material
Asia 6.5
14.9
North America
Rest of Western
Europe 17.0
1.2 Other
38.0
Germany
22.4 Eastern Europe
58
Report on
Economic Position
Review of Operations
Purchasing and
Supplier Network
Sales and Marketing
Purchasing and Supplier Network
Ensuring access to resources in a
volatile environment
With its globally oriented organisation, the Purchasing
and Supplier Network ensures access to all necessary
external resources in an environment that remains
highly volatile. Activities include the procurement
and quality assurance of production materials, raw
materials, capital goods and services as well as the
manufacturing of vehicle components produced
in-house. External suppliers are selected systematically
according to the criteria of quality, innovation, flexibil-
ity and cost. In 2018, procurement activities focused
on components for the fast-growing percentage of
electrified vehicles.
Connecting procurement markets
The BMW Group remains committed to its strategy of
maintaining a regional balance with regard to growth
in delivery, production and purchasing volumes. The
strategy makes an important contribution to natural
hedging against currency fluctuations. The global
distribution of purchasing volumes for production
materials and raw materials is closely linked to pro-
duction volumes in the BMW Group’s global plant
network. Global distribution remained largely stable
in the financial year 2018.
Global trade policy influences purchasing
Global trade policy is increasingly influencing the
BMW Group’s purchasing activities as well as its
globally interlinked supply chains. With its pur-
chasing strategy, the Group is pursuing the goal of
increasing its own competitiveness and at the same
time contributing towards cutting customs costs. This
is achieved, for example, through localisation in free
trade areas with minimum requirements in terms
of local value creation and through the intelligent
controlling of material flows within a global network.
The BMW Group’s purchasing function also works
to ensure the greatest possible flexibility to allow for
short-term changes in trade policy.
Combined Management Report 59
* Fuel
consumption
and CO2 emis-
sions informa-
tion are available
on page 108.
Sales and Marketing
www.bmwgroup.com / brands
The BMW Group’s sales and distribution network
currently comprises some 3,500 BMW, 1,600 MINI
and 140 Rolls-Royce dealerships worldwide. Sales are
conducted via independent authorised distributors,
branch offices of the BMW Group, subsidiaries, and
independent import companies in some markets.
BMW i remains on road to success
The BMW i offers not only trendsetting vehicle con-
cepts but also connected mobility services and a new
understanding of premium, which is determined in
particular by sustainability. The all-electric BMW i3*
has meanwhile established itself as one of the most
successful electric vehicles in its segment. With a cell
capacity increased to 120 ampere hours (Ah) and a
current gross energy content of 42.2 kilowatt hours
(kWh), a new generation of high-voltage batteries
is helping the BMW i3* and its sporty sister model
the BMW i3s* to extend its reach by about 30 % to
travel longer distances of up to 260 km. The entire
production chain is supplied with green energy for
both of these models and they are also 95 % recyclable.
Since its market launch in 2014, the BMW i8 has been
one of the best-selling hybrid sports cars. Launched
in 2018, the new BMW i8 Roadster* offers an emotional
combination of electric mobility and the experience of
open-top driving. Apart from its remarkable design,
pioneering technologies and sustainable mobility
concept, it stands above all for the driving pleasure
typically epitomised by BMW.
In addition to its BMW i vehicles, in 2018 the
BMW Group successfully offered a range of six BMW
plug-in hybrid models and one MINI plug-in* world-
wide. The BMW Group is committed to providing flex-
ible platforms where customers have the free choice of
drivetrain system depending on their personal pref-
erence. The advantage for the BMW Group lies in its
flexible response to uncertain demand developments
and the best possible utilisation of plant capacity.
As a systems provider, BMW i provides its customers
with solutions that go far beyond the vehicle itself:
BMW i 360° ELECTRIC and ChargeNow are compre-
hensive service offerings for charging both at home
and away from home. Energy services such as grid
integration for electric vehicles and battery storage
applications are also available. Additional offerings
include charging technologies such as inductive charg-
ing as well as charging infrastructure projects such as
the super-fast charging network Ionity.
Digitisation promotes individual mobility
In line with its Strategy NUMBER ONE > NEXT, the
BMW Group is increasingly investing in digital services.
The aim is to develop and successfully operate new
digital business models with a rigorously customer-
oriented approach. This enables the BMW Group to
additionally differentiate itself and underscores the
attractiveness of its vehicle portfolio. A directly acces-
sible customer base makes it possible to disseminate
offers of new products and services, which customers
can also benefit from after purchasing their vehicles.
Currently, the range of digital offerings is focused on
the areas MyCar (e. g. remote access to vehicle func-
tions such as air conditioning), MyJourney (e. g. real-
time traffic information and parking services), MyLife
(e. g. music streaming services) and MyAssistant (BMW
Intelligent Personal Assistant). The level of interest
in digital services has grown steadily in recent years.
BMW broadens model range
During the year under report, BMW launched a total
of five new models and also introduced two model
revisions as well as two new variants of BMW M
vehicles worldwide. The new BMW X2 went on
sale at dealerships in March 2018, followed by the
i8 Roadster* in May. The new X4 became available
to customers in July. The fourth generation of the
successful BMW X5 model and the new BMW 8 Series
Coupé were both launched in November. The Active
Tourer and Gran Tourer models of the BMW 2 Series
both underwent model revisions in the year under report,
and BMW M GmbH added the M2 and M5 Competition
as well as the M3 CS* variants to its portfolio.
Highest-ever number of deliveries for BMW M
The year 2018 was the most successful in the history
of BMW M GmbH. The main contributors to BMW M
deliveries in the High Performance segment, apart
from the M2*, were again the BMW M3 and M4 models
as well as the new BMW M5*. Within the Performance
segment, the new BMW X3 M40i* accounted for the
majority of deliveries. The strong demand at BMW M
also led to growth in BMW M certified dealerships.
During 2018, their number grew to more than 1,000
certified dealerships worldwide.
Apart from the M vehicles, BMW M GmbH also offers
special driving safety training courses under the brand
name BMW Driving Experience. During the financial
year 2018, more than 25,000 participants completed
training courses in Germany alone. Demand for the
training courses also grew internationally. Accordingly,
the international network partner of BMW M was
expanded to include China and South Africa. Alto-
gether, the BMW Driving Experience trained around
105,000 participants at international training locations
in 2018.
60
Report on
Economic Position
Review of Operations
Sales and Marketing
Workforce
In these times of digitalisation, the focus is on the
mobility and service requirements of premium
customers. Using digitalised channels such as BMW
Connected, customers are able to view their vehicle
status and also make use of functions outside the
vehicle. Offers and interactions connected with
services, maintenance and repairs can therefore be
synchronised via all customer channels (physically,
online or via the vehicle).
Since 2018, MINI Yours Customized has enabled its
customers to personalise their interior products via
3D printing and order them directly online. This
service was given the German Innovation Award in
the category “Excellence in Business to Consumer”.
BMW Intelligent Personal Assistant
In September 2018, the BMW Group introduced
the Intelligent Personal Assistant, which has been
available in the first vehicles and in the Connected
app as from March 2019. It explains the workings
of the vehicle to the customer and enables access to
functions and information by voice control. The assis-
tant supports drivers, learns their preferences and
knows their preferred settings, such as seat heating or
frequently used navigation destinations. The abilities
of the self-learning personal assistant are supported
by artificial intelligence and continuously enhanced.
BMW enters Formula E
In December 2018, at the beginning of the fifth sea-
son, BMW i Andretti Motorsport entered the ABB
FIA Formula E Championship as a works team. The
drivetrain of the racing car was developed in close
collaboration with the engineers of BMW i and BMW
Motorsport and embodies the technology transfer
between motor racing and series development like
no other motorsport project before it. Apart from
its sporting commitment, BMW i remains an official
partner of Formula E and, within the scope of this
partnership, provides the support vehicle fleet, includ-
ing the BMW i8 Coupé* as a safety car for the races.
* Fuel
consumption
and CO2 emis-
sions informa-
tion are available
on page 108.
MINI achieves second-best year
In 2018, due to external factors, the MINI brand was
unable to quite match the high level of deliveries seen
the previous year. In particular, a changed competitive
environment caused by the conversion to the new
WLTP testing cycle played a decisive role. Uncertainty
also arose from ongoing trade disputes. In several
markets, this led to considerable sales disruptions
and unexpectedly fierce competition. Nevertheless,
MINI managed to increase its share for small and
compact cars in the premium segment compared to
the previous year in more than 60 % of its markets.
The second generation of the MINI Countryman in
particular remains a cornerstone of the MINI brand.
Deliveries increased significantly year-on-year, with
the highly successful plug-in hybrid model making
a key contribution. Moreover, the MINI Convertible
was one of the best-selling vehicles of its kind in a
competitive market. Demand for the John Cooper
Works models also remained high, with a new record
share of total MINI deliveries.
Rolls-Royce Cullinan* successfully
takes to the road
Launched in November 2018, the new Cullinan* is
the first Rolls-Royce to exhibit outstanding driving
characteristics both on and off the road. At its world
première in May and the press event in October, the
Cullinan* was extremely well received by customers
and international media representatives alike. The
top-of-the-range model, the Rolls-Royce Phantom*,
which has been on the market since the beginning
of 2018, is extremely popular and contributed sig-
nificantly to the record year for Rolls-Royce Motor
Cars. At Rolls-Royce Motor Cars, the term bespoke
refers to equipment configurations with which the
vehicles are highly individualised in accordance with
customer requirements. The result is the creation of
unique vehicles that make a major contribution to
the company’s success and secure Rolls-Royce Motor
Cars an outstanding position in the luxury segment.
Enhancement and customisation
of the services business
The BMW Group’s services business again recorded
significant growth in the year under report. In
order to achieve this, continuous investments are
being made in a sustainable, flexible, global logistics
network that can optimally supply customers with
spare parts, accessories and lifestyle products on a
worldwide basis.
Combined Management Report Workforce
www.bmwgroup.com
Slight increase in workforce
At 31 December 2018, the BMW Group had a world-
wide workforce of 134,682 employees, a slight increase
(+ 3.7 %) compared to the end of previous financial
year (2017: 129,932 employees). The increase was
partly attributable to the further expansion of the
global production network. Moreover, in conjunction
with the implementation of the Group’s Strategy
NUMBER ONE > NEXT, a growing number of experts
continued to be hired in future-oriented fields such as
artificial intelligence and autonomous driving, electric
mobility, smart production and logistics, as well as
data analysis, software architecture, agile software
development and innovative drivetrain systems.
BMW Group employees
• 38
Automotive
Motorcycles
Financial Services
Other
Group
31. 12. 2018
31. 12. 2017
Change in %
121,994
117,664
3,709
8,860
119
3,506
8,645
117
134,682
129,932
3.7
5.8
2.5
1.7
3.7
61
Realignment of dual vocational training
The realignment of the dual vocational training system
launched in the previous year moved to the implemen-
tation phase during 2018. At the start of training in
2018, three new training profiles were introduced at
the German plant locations, namely for IT applications
development, IT systems integration, and electronics
for automation technology. Moreover, a new training
programme was established with twelve dual courses
of study, in which recruits can acquire a bachelor’s
degree in STEM subjects (science, technology, engi-
neering and mathematics). At the same time, new
teaching content was added to existing job profiles
and appropriate technical equipment acquired. Meas-
ures were also initiated at international locations to
restructure fields of expertise, focusing on automation
technology, robotics and additive manufacturing
processes. The total number of apprentices and
participants in development programmes for young
talent increased slightly to 4,964 (2017: 4,750; + 4.5 %).
BMW Group apprentices at 31 December
• 39
5,000
4,595
4,700
4,613
4,750
4,964
2,500
0
2014
2015
2016
2017
2018
High level of investment in employee qualification
Spending on training and development increased to
€ 373 million year-on-year (2017: € 349 million; + 6.9 %).
By training its workforce in areas such as electric
mobility, robotics, data analysis and artificial intel-
ligence, the BMW Group is creating an important
foundation for the future success of its Strategy
NUMBER ONE > NEXT. Managers are also closely
involved in training and are prepared in the areas
of transformation process design and leadership in
agile organisations.
62
Report on
Economic Position
Review of Operations
Workforce
Sustainability
BMW Group remains a highly attractive employer
In 2018, the BMW Group was once again ranked
among the world’s most attractive employers. In the
latest “World’s Most Attractive Employers” rankings
published by the agency Universum, the BMW Group
was once again named the most attractive automotive
company in the world.
In the period under report, BMW Group China was
also named the most attractive employer in the auto-
motive industry in both the local Universum Students
Survey and the Zhaopin Most Attractive Employer
Award.
The Group also came out top again in Trendence’s
Young Professional Barometer Germany. In the Tren-
dence Graduate Study Germany, the BMW Group
retained first place in the business management and
engineering target groups and improved its position
for the IT target group, where it moved into second
place. It also improved its rankings in the Universum
study “Young Professionals Germany”, finishing first,
second and third in the categories Business, Engineer-
ing and IT respectively. Based on the overall results of
studies across all sectors, the BMW Group remained
one of the world’s highest-ranked companies in 2018.
Employee attrition rate at BMW AG*
• 40
as a percentage of workforce
7.0
3.5
0
2.70
2.64
2.78
2.08
1.41
Diversity as a competitive factor
Diversity is a key factor in ensuring the BMW Group’s
continued competitiveness. Emphasis is placed on
the three aspects of gender, cultural background and
age / experience. The aim is to ensure equal opportu-
nities for all employees and at the same time utilise
and promote the diversity of the Group’s workforce.
To achieve this end, a broad array of measures was
implemented within the BMW Group during 2018.
Further information on this topic is also provided in
www.bmwgroup.com / svr
the Sustainable Value Report 2018.
The proportion of women in the workforce as a whole,
as well as in management functions and young talent
development programmes, increased during the finan-
cial year under report. The percentage of women in the
total BMW Group workforce rose to 19.9 % (BMW AG:
16.5 %), above the internal target range of 15 to 17 %.
The number of women in management functions rose
to 17.2 % across the BMW Group (BMW AG: 15.1 %).
In the year under report, female representation in the
BMW Group’s trainee and student programmes stood
at 44 % and 28 % respectively.
Proportion of female employees in manage-
ment functions at BMW AG / BMW Group*
• 41
in %
18
9
0
BMW Group 13.5
BMW AG 11.3
14.3
12.5
15.3
13.3
16.0
14.0
17.2
15.1
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
*Since 2017 including maternity leave.
* Number of employees on unlimited employment contracts leaving the Company.
The Group’s workforce is becoming increasingly
international. Employees from over 110 countries
work together successfully for BMW AG. Moreover, a
balanced age structure in the workforce encourages
an exchange of ideas and knowledge between gen-
erations and plays a key role in reducing the loss of
know-how when valuable employees retire.
Combined Management Report Sustainability
www.bmwgroup.com / responsibility
In order to secure its future existence, the BMW Group
consistently integrates sustainability in its business
model. The Company sees global challenges such as
climate change and urbanisation as opportunities
to drive innovation. In its constant endeavours, the
BMW Group concentrates on three main fields:
— The development of products and services
that provide sustainable individual mobility
(e. g. electric mobility and services such as
DriveNow and ReachNow)
— The efficient use of resources along the entire
value chain
— Responsibility towards employees and society
Further information on sustainability within the
BMW Group and related topics is provided in the
Sustainable Value Report 2018, which is published
online at
www.bmwgroup.com / svr.
Through its sustainability policy, the BMW Group
supports the achievement of the UN’s Sustainable
Development Goals (SDG), which were adopted in
September 2015.
The Sustainable Value Report is published together
with the Annual Report and is drawn up in accordance
with the “Comprehensive” option of the standards
of the Global Reporting Initiative (GRI). This is the
highest level of transparency set out in the GRI stand-
ards, in which all relevant information and indicators
of the aspects identified as material are reported on.
The Sustainable Value Report is drawn up subject to
a limited assurance engagement in accordance with
IASE 3000 (International Standard on Assurance
Engagements 3000 (Revised): “Assurance Engage-
ments other than Audits or Reviews of Historical
Financial Information”).
Based on the requirements of the German CSR Direc-
tive Implementation Act, BMW AG has been required
since the financial year 2017 to publish a non-financial
declaration at both Company and Group level. The
declaration is published jointly for BMW AG and the
BMW Group as a separate combined non-financial
report within the Sustainable Value Report.
The separate combined non-financial report is availa-
ble online within the Sustainable Value Report 2018
at
www.bmwgroup.com / svr.
63
Stakeholder dialogues and materiality analysis as
basis for sustainability management
The BMW Group is in continual dialogue with a large
number of stakeholders, both in Germany and abroad.
Stakeholder feedback provides the BMW Group with
a clear picture of how current trends are changing
the business environment and is incorporated in the
strategic considerations of the Company. For example,
in the course of 2018, stakeholder dialogue events on
the topics of urban mobility and digitalisation were
held in Los Angeles, Melbourne, Shenzhen, Rotter-
dam and Berlin.
As part of a regular materiality analysis, social chal-
lenges are continually monitored and analysed in
order to gauge their significance, from the point of
view of both external and internal stakeholders. The
results of the materiality analysis are described in
greater detail in the Sustainable Value Report 2018.
Top rankings in sustainability ratings
The BMW Group again achieved top rankings in
prestigious sustainability ratings in 2018, thereby
underlining its leading position as a sustainable
enterprise. In the Dow Jones Sustainability Indices
(DJSI) rating, the BMW Group is the only German
automobile maker to have been included once again
in the two indices “World” and “Europe” and has
been continuously represented since the indices were
established in 1999. In the CDP rating (formerly the
Carbon Disclosure Project), the Group achieved the
category “Leadership” with a rating of A– in the year
under report. Furthermore, the Group was again listed
in the British FTSE4Good Index in 2018.
Fleet CO2 emissions at previous year’s level
The development of sustainable products and services
is an integral part of the BMW Group’s business model.
The fleet-wide deployment of Efficient Dynamics
technologies and electrification are contributing to a
continual reduction in CO2 emissions. The electrifica-
tion of the fleet continued to make progress in 2018.
Due to the expansion of the model range, deliveries
of electrified BMW Group vehicles in 2018 increased
significantly and, at 142,617 units, surpassed the pre-
viously announced target of 140,000 units. Efficient
Dynamics and electrification form the basis for future
compliance with statutory CO2 and fuel consumption
limits going forward. The BMW Group has reduced
the CO2 emissions of its newly sold vehicles in Europe
by approximately 42 % between 1995 and 2018.
64
Report on
Economic Position
Review of Operations
Sustainability
Results of Opera-
tions, Financial Posi-
tion and Net Assets
In 2018, the BMW Group’s fleet of new vehicles sold
in Europe (EU-28) had an average fuel consumption of
4.9 litres of diesel and 6.0 litres of petrol per 100 km
respectively. CO2 emissions averaged 128 g / km
(adjusted value for 2017: 128 g / km). Despite a further
decline in the share of diesel vehicles, the figure was in
line with the previous year, also thanks to a significant
growth in deliveries of electrified models.
Clean production
In 2018, at 2.12 MWh per vehicle produced, the
BMW Group slightly reduced the amount of energy
consumed in the production process compared with
the previous year (2017: 2.17 MWh; – 2.3 %). This was
mainly due to the use of a new painting technology
at various locations, such as at the Munich plant, and
the installation of LED lighting throughout the entire
production network.
Through measures to boost energy efficiency and
the purchase and in-house generation of electricity
from renewable sources at BMW Group manufactur-
ing sites, production-related CO2 emissions fell by
2.4 % to 0.40 tonnes per vehicle produced in the year
under report compared with the previous year (2017:
0.41 tonnes).
In 2018, at 2.39 m³ per vehicle produced, water
consumption was slightly higher than the previous
year’s level (2017: 2.22 m³; + 7.7 %). This was mainly
due to above-average temperatures at the sites, which
had a direct impact on water consumption. The non-
recyclable waste from production processes rose to
4.27 kg per vehicle produced during the reporting
period (2017: 3.86 kg; + 10.6 %). This was mainly due
to a change in the structure of the waste disposal
companies at the Shenyang site. As a result, specific
waste streams, such as sludge from the wastewater
treatment plant, could not be recycled in the year
under report. Additionally, the high moisture content
from household waste at the plant in Rosslyn, South
Africa hindered recycling.
Sustainability along the value chain
Sustainability criteria also play a key role in the selec-
tion and assessment of suppliers. The BMW Group has
therefore comprehensively integrated sustainability
management in its purchasing processes. This also
includes greater transparency, which results from
close collaboration between the Group and its sup-
pliers. The BMW Group is also involved in initiatives
aimed at standardising sustainability requirements
and establishing verification mechanisms for critical
raw materials.
Sustainability in human resources policies
In 2018, the BMW Group continued to consolidate
its position as one of the most attractive employers
worldwide. Its leading role in terms of sustainability
contributes significantly to the high degree of employee
loyalty within the BMW Group and is one of the
reasons for the low staff attrition rate. This enables
the BMW Group to maintain a low level of personnel
recruitment expenditure. Further information is
provided in the section Workforce.
Social engagement
Social engagement is firmly anchored in the
BMW Group’s understanding of its corporate role.
As a globally operating company, the BMW Group
assumes responsibility and is concerned with current
social challenges. Its commitment focuses on long-
term solutions that are internationally applicable and
have a long-term impact according to the principle of
“helping people to help themselves”. In doing so, the
company concentrates on its core competencies, such
as intercultural understanding, social inclusion and
the conservation of resources.
Combined Management Report RESULTS OF OPERATIONS,
FINANCIAL POSITION AND
NET ASSETS
65
Results of operations
Deliveries of BMW, MINI and Rolls-Royce brand
vehicles during the financial year 2018 increased
slightly by 1.1 % year-on-year to 2,490,664 units. The
figure includes 459,581 units (2017: 384,124 units)
manufactured by the joint venture BMW Brilliance
Automotive Ltd., Shenyang.
BMW Group condensed income statement
• 42
in € million
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income and expenses
Profit before financial result
Financial result
Profit before tax
Income taxes
Profit from continuing operations
Loss from discontinued operations
Net profit
Earnings per share of common stock in €
Earnings per share of preferred stock in €
in %
Pre-tax return on sales
Post-tax return on sales
Gross margin
Effective tax rate
2018
2017*
Change in %
97,480
– 78,924
18,556
98,282
– 78,329
19,953
– 0.8
– 0.8
– 7.0
–
–
– 7.9
– 10.6
– 8.1
– 28.8
– 16.5
–
– 16.9
– 17.2
– 17.2
– 9,560
– 494
9,899
776
10,675
– 2,000
8,675
–
8,675
13.07
13.09
2017*
Change in %pts
10.9
8.8
20.3
18.7
– 0.8
– 1.4
– 1.3
7.5
– 9,558
123
9,121
694
9,815
– 2,575
7,240
– 33
7,207
10.82
10.84
2018
10.1
7.4
19.0
26.2
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
The BMW Group had a worldwide workforce of
134,682 employees at the end of the reporting period
(31 December 2017: 129,932 employees).
Gross profit for the twelve-month period under report
fell moderately year-on-year. A combination of higher
research and development expenses, intense com-
petition and currency effects more than offset the
positive effect of the growth in vehicle deliveries. The
currency impact was mainly attributable to changes in
the exchange rates of the US dollar, Chinese renminbi,
Russian rouble and Australian dollar against the euro.
The net amount reported for other operating income
and expenses had a positive effect. Profit before tax
for the year ended 31 December 2018 was moderately
down on the previous year.
66
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
Due to currency effects, BMW Group revenues
remained at a similar level to the previous year.
Adjusted for currency factors, revenues grew slightly
on the back of higher delivery volumes and a good
financing portfolio performance. The positive impact
of volume growth was held down by intense compe-
tition on the markets. The unexpectedly high level
of competition was due in particular to the reaction of
competitors to the early implementation of WLTP
regulations. Trade conflicts and uncertainties also
exacerbated the situation and had an unfavourable
impact on selling prices.
Group revenues by region were as follows:
BMW Group revenues by region
• 43
in %
Europe
Asia
Americas
Other regions
Group
2018
2017*
46.1
30.9
20.2
2.8
46.0
30.2
20.8
3.0
100.0
100.0
BMW Group cost of sales
• 44
in € million
Manufacturing costs
Cost of sales relating to financial services business
thereof interest expense relating to financial services business
Research and development expenses
thereof amortisation of capitalised development costs
Service contracts, telematics and roadside assistance
Warranty expenses
Other cost of sales
Cost of sales
2018
2017*
Change in %
43,262
23,383
2,051
5,320
1,414
2,234
1,729
2,996
43,442
22,932
1,801
4,920
1,236
2,081
2,097
2,857
78,924
78,329
– 0.4
2.0
13.9
8.1
14.4
7.4
– 17.5
4.9
0.8
The Group’s cost of sales were in line with the
previous year. Higher research and development
expenses as well as higher cost of sales relating to
financial services business were offset by positive
currency effects. Inter-segment eliminations reduced
the Group’s warranty expense for the year.
BMW Group performance indicators relating to research and development expenses
• 45
in %
Research and development expenses as a percentage of revenues
Research and development expenditure ratio
Capitalisation rate
*Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2018
5.5
7.1
43.3
2017*
Change in %pts
5.0
6.2
39.7
0.5
0.9
3.6
Combined Management Report Due to a continuation of the product initiative, vehicle
electrification and development work on autonomous
driving, research and development expenses amount-
ed to € 5,320 million (2017: € 4,920 million), a solid
increase over the previous year. As a result, total
research and development expenditure – comprising
research costs, non-capitalised development costs and
capitalised development costs (excluding amortisation
thereon) – amounted to € 6,890 million in the year
under report (2017: € 6,108 million). The higher level
of capitalised development costs was mainly related
to the production start of new models, modules and
architectures.
At € 9,558 million, selling and administrative expenses
were similar to one year earlier.
Depreciation and amortisation on property, plant
and equipment and intangible assets recorded in cost
of sales and in selling and administrative expenses
totalled € 5,113 million (2017: € 4,822 million).
The net amount of other operating income and
ex penses improved significantly from negative
€ 494 million to positive € 123 million, mainly due to
lower allocations to provisions for litigation.
Profit before financial result (EBIT) fell by € 778 million
to € 9,121 million (2017: € 9,899 million).
67
The financial result dropped by € 82 million to € 694 mil-
lion and was therefore significantly down on the pre-
vious year, partly due to a € 107 million deterioration
in the result from equity accounted investments.
The main factors here were the € 183 million positive
earnings effect in the previous year arising on the
sale of shares in HERE International B. V., Amsterdam,
offset by a € 107 million improvement in the earnings
contribution from BMW Brilliance Automotive Ltd.
on the back of higher volumes. The financial result
for the financial year 2018 was also influenced by the
change in other financial result. The previous year’s
figure contained the positive effect of fair value meas-
urement gains on commodity derivatives totalling
€ 236 million. As a result of the first-time application of
IFRS 9, most of these effects – without the adjustment
to comparative figures – are now recognised directly
in equity. Unlike the result from equity accounted
investments and the other financial result, both the
result on investments and the net interest result had
a positive impact on earnings in the financial year
under report. The result on investments included a
gain of € 209 million arising in conjunction with the
revaluation of the DriveNow companies.
Overall, profit before tax decreased moderately to
€ 9,815 million (2017: € 10,675 million).
The income tax expense for the year amounted to
€ 2,575 million (2017: € 2,000 million).
68
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Economic Position
Results of Opera-
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tion and Net Assets
Results of operations by segment
BMW Group revenues by segment
• 46
in € million
Automotive
Motorcycles
Financial Services
Other Entities
Eliminations
Group
2018
20171
Change in %
Currency adjusted
change 2 in %
85,846
2,173
28,165
6
– 18,710
97,480
85,742
2,272
27,567
7
– 17,306
98,282
0.1
– 4.4
2.2
– 14.3
– 8.1
– 0.8
2.2
– 1.4
4.5
– 7.6
11.1
1.2
BMW Group profit / loss before tax by segment
• 47
in € million
Automotive
Motorcycles
Financial Services
Other Entities
Eliminations
Group
BMW Group margins by segment
• 48
in %
Automotive
Gross profit margin
EBIT margin
Motorcycles
Gross profit margin
EBIT margin
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 The adjustment for exchange rate factors is calculated by applying the relevant current exchange rates to the prior year figures.
2018
20171
Change in %
6,977
169
2,161
– 45
553
9,815
8,717
205
2,207
80
– 534
– 20.0
– 17.6
– 2.1
–
–
10,675
– 8.1
2018
20171
Change in %pts
16.2
7.2
20.0
8.1
19.1
9.2
20.9
9.1
– 2.9
– 2.0
– 0.9
– 1.0
Combined Management Report 69
Financial Services segment
Despite unfavourable foreign currency translation
effects, Financial Services segment revenues rose
slightly year-on-year on the back of portfolio growth.
Cost of sales relating to financial services business
increased by € 555 million (2017: € 23,986 million).
The net amount of other operating income and
expenses deteriorated from negative € 17 million to
negative € 82 million. The decline was mainly due to
higher expenses for litigation.
The segment’s risk profile remained stable during the
financial year 2018. Whereas price levels on the North
American pre-owned vehicle market improved slightly,
residual values for pre-owned vehicles in Germany
dropped slightly, mainly because of the debate on
diesel bans in a number of cities.
Profit before tax in the Financial Services segment was
slightly down on the previous year, primarily due to
negative foreign currency translation effects.
Other Entities segment / Eliminations
Profit before tax in the Other Entities segment fell
significantly year-on-year. Among other things, higher
administrative expenses arising in connection with
the adjustment to the existing pension obligation
in the UK (Guaranteed Minimum Pension) had a
negative impact. In addition, lower market interest
rates caused the net interest result to deteriorate.
Inter-segment eliminations increased Group profit
before tax by € 553 million in the financial year 2018,
a year-on-year improvement of € 1,087 million. This
was mainly due to the positive impact of reversals in
conjunction with the strong portfolio growth of prior
years for leased products and the favourable effect of
lower margin eliminations in 2018.
Automotive segment
Automotive segment revenues remained at a similar
level to the previous year due to currency factors.
Adjusted for currency factors, they rose slightly, par-
tially as a result of higher delivery volumes. Despite
the volume growth achieved, market competition
intensified to an unexpectedly high level, mainly
reflecting the reaction of competitors to the early
implementation of WLTP regulations. Trade conflicts
and other uncertainties also exacerbated the situation
and had an unfavourable impact on selling prices. The
segment’s cost of sales went up slightly year-on-year,
with higher research and development expenses as
well as raw materials costs contributing to the increase.
Additions to provisions in connection with goodwill
and warranty measures also had an effect on cost of
sales. Warranty expenses include the accrued expense
for vehicle recall actions, the cost of which is expected
to exceed amounts previously recognised. In this
context, a figure of € 793 million was allocated to the
warranty provision, partially in connection with the
exhaust gas recirculation cooler. The lower volume
of ongoing warranty expenditure compared with the
previous year had a positive impact.
At € 7,880 million, selling and administrative expenses
were similar to one year earlier.
The net amount of other operating income and
expenses improved from negative € 525 million to
positive € 134 million in the year under report, mainly
due to lower allocations to provisions for litigation.
At € 795 million, the Automotive segment’s financial
result was slightly down on the previous year, influ-
enced by the factors described above for the Group.
Profit before tax for the year was significantly lower
than one year earlier.
Motorcycles segment
Motorcycles segment revenues decreased slightly year-
on- year, mainly due to the ramp-up situation caused
by multiple model changes and compounded by a
combination of product mix and currency effects.
Profit before tax for the twelve-month period was
significantly lower than one year earlier.
70
Report on
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Results of Opera-
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tion and Net Assets
Financial position
The consolidated cash flow statements for the Group
and the Automotive and Financial Services segments
show the sources and applications of cash flows
for the financial years 2018 and 2017, classified
according to operating, investing and financing
activities. Cash and cash equivalents in the cash flow
statements correspond to the amounts disclosed in
the balance sheet.
Cash flows from operating activities are determined
indirectly, starting with Group and segment net profit.
By contrast, cash flows from investing and financing
activities are based on actual payments and receipts.
BMW Group cash flows
• 49
in € million
2018
2017
Change
5,051
– 7,363
4,296
– 44
1,940
5,909
– 6,163
1,572
– 159
1,159
– 858
– 1,200
2,724
115
781
Cash inflow (+) / outflow (–) from operating activities
Cash inflow (+) / outflow (–) from investing activities
Cash inflow (+) / outflow (–) from financing activities
Effects of exchange rate and changes in composition of Group
Change in cash and cash equivalents
The decrease in cash inflow from the Group’s operat-
ing activities was due to the lower net profit for the
year and higher working capital. The lower increase
in receivables from financial services compared to the
previous year had an offsetting effect.
The higher level of cash outflow from the Group’s
investing activities mainly reflects a rise in invest-
ments in intangible assets and property, plant and
equipment, increased expenditure for investment
assets (primarily relating to the acquisition of the
DriveNow companies) and lower proceeds from the
disposal of investment assets. The decreased level of
investments in marketable securities and investment
funds had an offsetting effect.
The increase in cash inflow from the Group’s financing
activities resulted mainly from the issue of bonds and
from new loans taken up. The repayment of commer-
cial paper had an offsetting effect.
The cash outflow from investing activities exceeded the
cash inflow from operating activities by € 2,312 million
in the financial year 2018. In the previous year, the
shortfall had been lower at € 254 million.
Combined Management Report BMW Group change in cash and cash equivalents
• 50
in € million
15,000
+ 5,051
10,000
9,039
– 44
+ 4,296
10,979
– 7,363
5,000
0
Cash and
cash
equivalents
31. 12. 2017
Cash inflow
from
operating
activities
Cash outflow
from
investing
activities
Cash inflow
from
financing
activities
Currency
translation,
changes in
Group composition
Cash and
cash
equivalents
31. 12. 2018
71
15,000
10,000
5,000
0
Free cash flow for the Automotive segment was as
follows:
Free cash flow Automotive segment
• 51
in € million
2018
2017
Change
Cash inflow (+) / outflow (–) from operating activities
Cash inflow (+) / outflow (–) from investing activities
Adjustment for net investment in marketable securities and investment funds
Free cash flow Automotive segment
9,352
– 6,769
130
2,713
10,848
– 6,544
155
4,459
– 1,496
– 225
– 25
– 1,746
The decrease in cash inflow from the Automotive
segment’s operating activities was mainly due to a
combination of lower net profit for the year and higher
working capital. Cash outflow from investing activities
was influenced in particular by higher disbursements
for investments in intangible assets and property,
plant and equipment.
72
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Results of Opera-
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tion and Net Assets
In the Automotive segment, net financial assets com-
prised the following:
Net financial assets Automotive segment
• 52
in € million
2018
2017
Change
8,631
4,321
7,694
7,157
4,336
9,774
20,646
21,267
– 1,158
19,488
– 1,480
19,787
1,474
– 15
– 2,080
– 621
322
– 299
Cash and cash equivalents
Marketable securities and investment funds
Intragroup net financial assets
Financial assets
Less: external financial liabilities*
Net financial assets Automotive segment
* Excluding derivative financial instruments.
Net cash inflows and outflows for the Financial Ser-
vices segment were as follows:
Net cash flows for the Financial Services segment
• 53
in € million
2018
2017
Change
Cash inflow (+) / outflow (–) from operating activities
Cash inflow (+) / outflow (–) from investing activities
Cash inflow (+) / outflow (–) from financing activities
Net
– 6,790
130
6,793
133
– 6,384
937
4,334
– 1,113
– 406
– 807
2,459
1,246
The increase in cash outflow from the Financial Ser-
vices segment’s operating activities was mainly due to
the lower net profit for the year. The decrease in cash
inflow from investing activities was largely attributable
to cash proceeds received in the previous year from
the disposal of investments and other business units
(€ 970 million). Cash inflow from financing activities
was mainly driven by new loans raised and an increase
in asset-backed securities financing.
Combined Management Report 73
On account of its good ratings and the high level
of acceptance it enjoys on capital markets, the
BMW Group was again able to refinance operations
at favourable conditions on debt capital markets
during the financial year 2018. In addition to bonds,
loan notes and private placements, the Group also
issued commercial paper. As in previous years, all
issues were in high demand, not only from private
investors but also in particular from institutional
investors. In addition, retail customer and dealership
financing receivables as well as rights and obligations
from leasing contracts are securitised in the form of
asset-backed securities (ABS) financing arrangements.
Specific banking instruments, such as the customer
deposits used by the Group’s own banks in Germany
and the USA, are also employed for financing purposes.
In addition, loans are taken from international banks.
Refinancing
A broad range of instruments on international money
and capital markets is used to refinance worldwide
operations. Funds raised are used almost exclusively to
finance the BMW Group’s Financial Services business.
The overall objective of Group financing is to ensure
the solvency of the BMW Group at all times, focusing
on three areas:
1. The ability to act through permanent access
to strategically important capital markets
2. Autonomy through the diversification of refi-
nanc ing instruments and investors
3. Focus on value through the optimisation of
financing costs
Financing measures undertaken at corporate level
ensure access to liquidity for the Group’s operating
sub sidiaries at standard market conditions and con-
sistent credit terms. Funds are acquired in line with
a target liability structure, comprising a balanced
mix of financing instruments. The use of longer-term
instruments to fund the Group’s Financial Services
business and the maintenance of a sufficiently high
liquidity reserve serves to avoid the liquidity risk in
the portfolio. This conservative financial approach
also helps the Group’s rating. Further information
is provided in the section Liquidity risks within the
“Report on Outlook, Risks and Opportunities”.
74
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
BMW Group composition financial liabilities
• 54
in € million
Derivate instruments 1,675
Commercial paper 2,480
Liabilities to banks
13,196
Liabilities from
customer deposits
(banking) 14,359
Asset-backed financing
transactions 17,335
Other 1,206
Bonds
53,346
BMW Group financial liabilities by maturity
• 55
in € million
60,000
30,000
51,851
41,100
38,825
43,865
12,921
9,683
0
Maturity (years)
within
1
between
1– 5
later
than 5
2017 2018
2017 2018
2017 2018
In 2018, the BMW Group issued four euro bench-
mark bonds on the European capital market with a
total issue volume of € 7.3 billion, as well as bonds
on the US capital market with a total issue volume
of US$ 7 billion. Bonds were also issued in British
pounds, Canadian dollars and Chinese renminbi for
a total amount of € 1.8 billion. Private placements
totalling € 4.1 billion were also issued.
A total of nine public ABS transactions were executed
in 2018, including three in the USA, two in China and
one each in Germany, France, Canada and the UK with
a total volume equivalent to € 5.9 billion. Further funds
were also raised via new ABS conduit transactions in
Japan, the UK, Germany, Canada, Australia and the
USA amounting to € 2.7 billion. Other transactions
remain in place in Germany, Switzerland, South
Korea, South Africa and Australia, amongst others.
The following table provides an overview of amounts
utilised at 31 December 2018 in connection with the
BMW Group’s money and capital market programmes:
Programme
in € billion
Programme
framework
Amount
utilised*
Euro Medium Term Notes
Australian Medium Term Notes
Commercial Paper
50.0
1.5
13.1
36.6
–
2.4
* Measured at exchange rates at the relevant transaction dates.
At 31 December 2018, liquidity remained at a solid
level of € 16.3 billion.
The BMW Group also has access to a syndicated credit
line, which was newly agreed upon in July 2017. The
syndicated credit line of € 8 billion has a minimum
term up to July 2023 and is being made available by a
consortium of 44 international banks. The credit line
was not being utilised at 31 December 2018.
Further information with respect to financial liabilities
notes 31, 35 and 39 to the Group
is provided in
Financial Statements.
see
notes 31,
35 and 39
Combined Management Report Net assets
BMW Group condensed balance sheet at 31 December
• 56
75
in € million
Assets
Intangible assets
Property, plant and equipment
Leased products
Investments accounted for using the equity method
Other investments
Receivables from sales financing
Financial assets
Deferred and current tax
Other assets
Inventories
Trade receivables
Cash and cash equivalents
Assets held for sale
Total assets
EQUITy AND LIABILITIES
Equity
Pension provisions
Other provisions
Deferred and current tax
Financial liabilities
Trade payables
Other liabilities
Liabilities in conjunction with assets held for sale
Group
2018
20171
Change in %
Currency adjusted
change2 in %
Proportion of
balance sheet
total in %
2018
10,971
19,801
38,572
2,624
739
86,783
7,685
2,956
11,816
13,047
2,546
10,979
461
9,464
18,471
36,257
2,769
690
80,434
10,334
3,559
9,115
12,707
2,667
9,039
–
208,980
195,506
58,088
2,330
11,854
2,964
103,597
9,669
20,416
62
54,107
3,252
11,999
3,281
94,648
9,731
18,488
–
15.9
7.2
6.4
– 5.2
7.1
7.9
– 25.6
– 16.9
29.6
2.7
– 4.5
21.5
–
6.9
7.4
– 28.4
– 1.2
– 9.7
9.5
– 0.6
10.4
–
6.9
15.8
6.7
4.6
– 5.2
6.0
7.2
– 26.0
– 19.2
29.6
2.7
– 4.5
21.8
–
6.1
7.6
– 28.6
– 2.0
– 14.4
8.2
– 1.0
9.7
–
6.1
5.2
9.5
18.5
1.3
0.4
41.4
3.7
1.4
5.7
6.2
1.2
5.3
0.2
100.0
27.8
1.1
5.7
1.4
49.6
4.6
9.8
0.0
100.0
Total equity and liabilities
208,980
195,506
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 The adjustment for exchange rate factors is calculated by applying the relevant current exchange rates to the prior year figures.
The balance sheet total of the BMW Group increased
solidly compared to 31 December 2017.
Intangible assets were significantly higher than one
year earlier, mainly due to the increase in capitalised
development costs.
Property, plant and equipment rose solidly compared
to the previous financial year, with investments in the
X5 and X7 models as well as in the 3 Series in particular
contributing to the increase.
Leased products also went up solidly year-on-year
on the back of portfolio growth in various countries,
including Germany and France. Adjusted for currency
factors, leased products increased slightly.
Receivables from sales financing increased solidly
over the twelve-month period, mainly due to larger
credit financing volumes in the USA, the UK and
China. A total of 1,277,207 new credit financing
contracts were signed during the financial year 2018.
Compared to the end of the previous financial year,
the contract portfolio under management grew by
7.0 % to 3,889,344 contracts.
76
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
Financial assets decreased significantly compared
to 31 December 2017, mainly due to changes in the
volume of currency derivatives and their fair value
measurement. Lower fair values as well as a change in
the volume of commodity derivatives also contributed
to this development.
Other assets were significantly higher than one year ear-
lier. The increase was attributable, among other items,
to the higher volume of return right assets for future
leased vehicles in conjunction with the introduction of
IFRS 15, higher receivables from companies in which
an investment is held and an increase in prepayments.
Further information relating to IFRS 15 is provided in
note 6 to the Group Financial Statements.
see
note 6
Balance sheet structure – Group
• 57
Balance sheet total in € billion
210
140
70
0
209
196
209
196
28 %
28 % Equity
Non-current assets 60 %
62 %
38 %
35 % Non-current provisions and liabilities
Current assets 40 %
38 %
34 %
37 % Current provisions and liabilities
thereof cash and cash equivalents 5 %
5 %
2018
2017 *
2018
2017 *
Balance sheet structure – Automotive segment
• 58
Balance sheet total in € billion
100
66
33
0
97
94
97
94
Non-current assets 47 %
46 %
41 %
42 % Equity
18 %
17 % Non-current provisions and liabilities
Current assets 53 %
54 %
41 %
41 % Current provisions and liabilities
thereof cash and cash equivalents 9 %
8 %
2018
2017 *
2018
2017 *
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
210
140
70
0
100
66
33
0
Combined Management Report 77
31. 12. 2018
31. 12. 2017*
Change in %pts
27.8
41.0
10.2
27.7
42.0
10.7
0.1
– 1.0
– 0.5
Group equity rose by € 3,981 million to € 58,088 million,
increased primarily by the profit of € 7,117 million
attributable to shareholders of BMW AG and decreased
by the dividend payment of € 2,630 million.
BMW Group equity ratio
• 59
in %
Group
Automotive segment
Financial Services segment
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
Pension provisions decreased significantly compared
to the end of the financial year 2017. Higher discount
rates and lower inflation expectations in Germany and
the UK as well as a revision of mortality tables in the
UK contributed to this development.
Financial liabilities increased solidly compared to the
end of the previous year, mainly due to the issue of
new long-term bonds.
The significant increase in other liabilities includes
the effect of higher return right liabilities for future
leased vehicles in conjunction with the introduction of
IFRS 15. Further information is provided in
note 6
to the Group Financial Statements.
The line items “Assets held for sale” and “Liabilities
in connection with assets held for sale” relate to the
discontinued operations of the DriveNow companies.
Further information is provided in
note 2 to the
Group Financial Statements.
Overall, the results of operations, financial position
and net assets position of the BMW Group remained
stable during the year under report.
see
note 6
see
note 2
78
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
Value added statement
The value added statement shows the value of work
performed by the BMW Group during the financial
year, less the value of work bought in. Deprecia-
tion and amortisation, cost of materials, and other
expenses are treated as bought-in costs in the value
added calculation. The allocation statement applies
value added to each of the participants involved in
the value added process. The bulk of the net value
BMW Group value added statement
• 60
Work perFormed
Revenues
Financial income
Other income
Total output
Cost of materials 2
Other expenses
Bought-in costs
Gross value added
Depreciation and amortisation of total tangible,
intangible and investment assets
Net value added
AllocAtion
Employees
Providers of finance
Government / public sector
Shareholders
Group
Minority interest
Net value added
added benefits employees. The remaining proportion
in the Group is retained to finance future operations.
The gross value added amount treats depreciation as
a component of value added which, in the allocation
statement, would be treated as internal financing.
Net valued added by the BMW Group remained at a
high level in the financial year 2018.
2018
in € million
2018
in %
2017
1
in € million
2017
1
in %
Change
in %
97,480
989
774
98.2
1.0
0.8
98,282
1,123
720
98.2
1.1
0.7
99,243
100.0
100,125
100.0
53,132
12,924
66,056
33,187
8,441
24,746
12,479
2,283
2,777
2,303
4,814
90
53.5
13.1
66.6
33.4
8.5
24.9
50.4
9.2
11.2
9.3
19.5
0.4
51,043
15,630
66,673
33,452
8,455
24,997
12,052
2,066
2,204
2,630
5,959
86
51.0
15.6
66.6
33.4
8.4
25.0
48.2
8.3
8.9
10.5
23.8
0.3
24,746
100.0
24,997
100.0
– 0.8
– 11.9
7.5
– 0.9
4.1
– 17.3
– 0.9
– 0.8
– 0.2
– 1.0
3.5
10.5
26.0
– 12.4
– 19.2
4.7
– 1.0
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 Cost of materials comprises all primary material costs incurred for vehicle production plus ancillary material costs (such as customs duties, insurance premiums and freight).
Combined Management Report
79
BMW Group value added 2018
• 61
in %
Depreciation and amortisation 8.5
13.1 Other expenses
Cost of materials 53.5
24.9 Net value added
50.4 % Employees
9.2 % Providers of finance
11.2 % Government / public sector
9.3 % Shareholders
19.5 % Group
0.4 % Minority interest
Business environment and review of operations
The general and sector-specific environment of BMW AG
is essentially the same as that of the BMW Group and is
described in the Report on Economic Position section
of the Combined Management Report.
BMW AG develops, manufactures and sells automo-
biles and motorcycles as well as spare parts and acces-
sories manufactured in-house, by foreign sub sidiaries
and by external suppliers, and performs services
related to these products. Sales activities are carried
out primarily through branches, subsidiaries, inde-
pendent dealerships and importers. In 2018, BMW AG
increased automobile deliveries by 25,782 units to
2,519,897 units. This figure includes 490,582 units
relating to series sets supplied to the joint venture
BMW Brilliance Automotive Ltd., Shenyang, an
increase of 93,833 units over the previous year.
At 31 December 2018, BMW AG employed a workforce
of 89,842 people (31 December 2017: 87,940 people).
80
Report on
Economic Position
Comments on
Financial Statements
of BMW AG
COMMENTS ON FINANCIAL
STATEMENTS OF BMW AG
Bayerische Motoren Werke Aktiengesellschaft (BMW AG),
based in Munich, Germany, is the parent company of
the BMW Group. The comments on the BMW Group
and Automotive segment provided in earlier sections
apply to BMW AG, unless presented differently in
the following section. The Financial Statements of
BMW AG are drawn up in accordance with the pro-
visions of the German Commercial Code (HGB) and
the relevant supplementary provisions contained in
the German Stock Corporation Act (AktG).
The key financial and non-financial performance
indicators for BMW AG are essentially identical and
concurrent with those of the Automotive segment of
the BMW Group. These are described in detail in the
Report on Economic Position section of the Combined
Management Report.
Differences between the accounting treatment of the
German Commercial Code and International Financial
Reporting Standards (IFRS), according to which the
BMW Group Financial Statements are prepared, are
mainly to be found in connection with the capitali-
sation of intangible assets, the creation of valuation
units, the recognition and measurement of financial
instruments and provisions as well as the recognition
of deferred tax assets. Differences also arise in the
presentation of assets and liabilities and of items in
the income statement.
Combined Management Report Results of operations
BMW AG Income Statement
• 62
in € million
Revenues
Cost of sales
Gross profit
Selling expenses
Administrative expenses
Research and development expenses
Other operating income and expenses
Result on investments
Financial result
Income taxes
Profit after income tax
Other taxes
Net profit
Transfer to revenue reserves
Unappropriated profit available for distribution
81
2018
2017
78,355
– 63,841
14,514
– 4,078
– 2,803
– 5,859
1,026
2,344
– 1,452
– 872
2,820
– 19
2,801
– 498
2,303
79,215
– 62,817
16,398
– 3,958
– 2,733
– 5,168
– 303
1,081
– 541
– 1,563
3,213
– 16
3,197
– 567
2,630
Despite the higher number of deliveries, revenues
were 1.1 % lower than in the previous financial
year. The decrease was mainly due to exchange-rate
effects, selling price adjustments and the change in
the valuation method used to measure provisions for
warranties, goodwill and product guarantees. In geo-
graphical terms, the decrease mainly related to Europe
and the USA. Revenues totalled € 78,355 million (2017:
€ 79,215 million), of which Group internal revenues
accounted for € 58,707 million (2017: € 59,736 million)
or 74.9 % (2017: 75.4 %).
Cost of sales increased by 1.6 % to € 63,841 million,
mostly due to the higher number of deliveries and the
rise in cost of materials. The change in the valuation
method used for provisions for warranties, goodwill
and product guarantees had an offsetting effect. Gross
profit decreased by € 1,884 million to € 14,514 million.
Selling and administrative expenses went up overall
year-on-year, partly reflecting the impact of the larger
workforce as well as higher expenses for selling and
marketing obligations.
Research and development expenses related mainly to
new vehicle models in conjunction with the continued
product offensive (including the new 3 Series and
X models), expenses for the development of refer-
ence architectures and drivetrain systems as well as
higher expenditure for the electrification of vehicles
and autonomous driving. Compared to the previous
year, research and development expenses increased
by 13.4 %.
The net amount of other operating income and
expenses improved by € 1,329 million to a net positive
amount of € 1,026 million. The year-on-year change
resulted mainly from the reversal of provisions for
warranty, goodwill and product guarantees due to the
changed valuation method as well as to lower alloca-
tions or higher reversals to provisions for litigation
and liability risks.
Results on investments benefited from higher income
arising under profit transfer arrangements with Group
companies. By contrast, the financial result deteriorated
year-on-year by € 911 million, mainly due to higher
interest expenses for pension liabilities and expenses
incurred for the corresponding plan assets as well as
an impairment loss recognised on the investment in
SGL Carbon SE, Wiesbaden.
The expense for income taxes relates primarily to
current tax for the financial year 2018.
After deducting the expense for taxes, the Company
reported a net profit of € 2,801 million, compared to
€ 3,197 million in the previous year.
82
Report on
Economic Position
Comments on
Financial Statements
of BMW AG
Financial and net assets position
BMW AG Balance Sheet at 31 December
• 63
in € million
Assets
Intangible assets
Property, plant and equipment
Investments
Tangible, intangible and investment assets
Inventories
Trade receivables
Receivables from subsidiaries
Other receivables and other assets
Marketable securities
Cash and cash equivalents
Current assets
Prepayments
Surplus of pension and similar plan assets over liabilities
Total assets
EQUITy AND LIABILITIES
Subscribed capital
Capital reserves
Revenue reserves
Unappropriated profit available for distribution
Equity
Registered profit-sharing certificates
Pension provisions
Other provisions
Provisions
Liabilities to banks
Trade payables
Liabilities to subsidiaries
Other liabilities
Liabilities
Deferred income
Total equity and liabilities
2018
2017
252
11,976
3,559
15,787
4,811
947
8,570
3,595
4,080
6,542
288
11,455
3,676
15,419
4,643
766
7,641
2,827
4,185
4,218
28,545
24,280
535
668
483
1,290
45,535
41,472
658
2,177
10,103
2,303
15,241
658
2,153
9,605
2,630
15,046
28
29
214
7,824
8,038
545
5,560
12,670
285
19,060
3,168
45,535
139
8,469
8,608
965
5,619
8,187
333
15,104
2,685
41,472
Capital expenditure on intangible assets and prop-
erty, plant and equipment in the year under report
totalled € 2,975 million (2017: € 2,628 million), up by
13.2 % compared to the previous year. Depreciation
and amortisation amounted to € 2,470 million (2017:
€ 2,350 million).
The carrying amount of investments decreased to
€ 3,559 million (2017: € 3,676 million), mainly as a result
of an impairment loss of € 119 million (2017: reversal
of impairment losses of € 70 million) recognised on the
investment in SGL Carbon SE, Wiesbaden in order to
reduce its carrying amount to the lower market value.
Combined Management Report At € 4,811 million (2017: € 4,643 million), inventories
were higher than one year earlier due to an increase
in goods for resale.
Receivables from subsidiaries, most of which relate to
intragroup financing receivables, rose to € 8,570 million
(2017: € 7,641 million).
The increase in other receivables and other assets to
€ 3,595 million (2017: € 2,827 million) was mainly due
to higher receivables from companies with which
an investment relationship exists and to higher tax
receivables.
Equity increased by € 195 million to € 15,241 million.
The equity ratio changed from 36.3 % to 33.5 %, mainly
due to the increased balance sheet total.
In order to secure pension obligations, cash funds
totalling € 550 million were transferred to BMW Trust
e. V., Munich, in conjunction with a Contractual Trust
Arrangement (CTA), to be invested in plan assets. Plan
assets are offset against the related guaranteed obliga-
tions. The resulting surplus of assets over liabilities is
reported in the BMW AG balance sheet on the line item
Surplus of pension and similar plan assets over liabilities.
Provisions for pensions increased from € 139 million
to € 214 million, after offsetting of pension liabilities
with pension assets.
Other provisions decreased year on year, mainly due
to a change in the valuation method used for provisions
for warranties, goodwill and product guarantees as
well as to a reduction in litigation and liability risks.
Additions to provisions for selling and marketing
obligations had an offsetting effect.
Liabilities to banks decreased by € 420 million, mainly
as a result of the repayment of project-related loans.
The increase in liabilities to subsidiaries in the amount of
€ 4,483 million was mainly due to intragroup refinancing.
Deferred income increased by € 483 million to
€ 3,168 million and included mainly amounts for
services still to be performed relating to service and
maintenance contracts.
Liquidity within the BMW Group is managed centrally
by BMW AG on the basis of a group-wide liquidity
concept. This involves concentrating a significant part
of the Group’s liquidity at the level of BMW AG. An
important instrument in this context is the cash pool
based at BMW AG. The liquidity position reported
by BMW AG therefore reflects the global activities of
BMW AG and other Group companies.
83
Cash and cash equivalents increased by € 2,324 million
to € 6,542 million, mainly due to the surplus from
operating activities and as a result of the higher level
of financial liabilities to subsidiaries. The repayment
of loans as well as the payment of the dividend for
the previous financial year had an offsetting effect.
Risks and opportunities
BMW AG’s performance is essentially dependent on
the same set of risks and opportunities that affect the
BMW Group and which are described in detail in the
Report on Outlook, Risks and Opportunities section
of the Combined Management Report. As a general
rule, BMW AG participates in the risks entered into
by Group companies in proportion to the respective
shareholding percentage.
BMW AG is integrated in the group-wide risk man-
agement system and internal control system of the
BMW Group. Further information is provided in the
section Internal Control System Relevant for Accounting
and Financial Reporting Processes within the Combined
Management Report.
Outlook
Due to its significance in the Group and its close ties
with Group companies, expectations for BMW AG
with respect to its financial and non-financial
performance indicators correspond largely to the
BMW Group’s outlook for the Automotive segment.
This is described in detail in the Report on Outlook,
Risks and Opportunities section of the Combined
Management Report.
KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, has
issued an unqualified audit opinion on the financial
statements of BMW AG, of which the balance sheet and
the income statement are presented here. The BMW AG
financial statements for the financial year 2018 will be
submitted to the operator of the electronic version of
the German Federal Gazette and can be obtained via the
Company Register website. These financial statements
are available from BMW AG, 80788 Munich, Germany.
84
Report on Outlook,
Risks and
Opportunities
Outlook
REPORT ON OUT-
LOOK, RISKS AND
OPPORTUNITIES
Growth in deliveries planned
EBIT margin in the range
of 6 to 8 %
Business environment remains
volatile
OUTLOOK
The report on outlook, risks and opportunities describes
the expected development of the BMW Group, includ-
ing the significant risks and opportunities, from a
Group management perspective. In line with the
Group’s internal management system, the outlook
covers a period of one year. Risks and opportunities
are managed on the basis of a two-year assessment.
The report on risks and opportunities therefore
addresses a period of two years.
The report on outlook, risks and opportunities con-
tains forward-looking statements. These are based
on the BMW Group’s expectations and assessments
and are subject to uncertainty. As a result, actual out-
comes can deviate either positively or negatively from
the expectations described below – for example on
account of political and / or economic developments.
The continuous forecasting process ensures the
BMW Group’s ability to exploit opportunities quickly
and systematically as they arise and react in a similar
way to unexpected risks. The principal risks and
opportunities are described in detail in the section
Risks and Opportunities. The matters discussed
therein are relevant for all of the BMW Group’s key
performance indicators and could result in variances
between the outlook and actual outcomes.
Combined Management Report 85
Gross domestic product in the eurozone is only
expected to grow by around 1.5 % in 2019. Germany’s
economy should see growth on a similar scale (+ 1.4 %).
The growth prospects of other member states in the
eurozone are expected to be on the modest side.
France (+ 1.4 %) and Italy (+ 0.7 %) are likely to see an
increase in GDP over the outlook period. Based on an
expected growth rate of 2.2 %, the Spanish economy
is set to grow faster than the eurozone average.
The UK’s economic performance in the outlook period
will be influenced significantly by the progress of EU
exit negotiations. The lack of planning certainty con-
tinues to weigh on companies and private households
alike. Consequently, GDP growth of only 1.4 % is
forecast for 2019. Uncertainty remains at a high level.
Economic momentum in the USA is expected to weaken
only slightly compared with the previous year. The
high employment rate, combined with the ongoing
economic stimulus from the tax reform, should con-
tinue to have a positive impact on economic activity in
2019, as a result of which the economy is expected to
grow by 2.4 %. The US Federal Reserve will most likely
continue pursuing a moderately restrictive monetary
policy. Unexpected developments, in particular in US
domestic policy, could result in a less favourable outlook.
In China, reducing overcapacities and strengthening
domestic consumption will continue to have priority
in 2019. Against this backdrop, GDP is still forecast
to rise by 6.2 %. Achieving a balance between short-
term measures aimed at stabilising the economy and
restructuring the Chinese economy on a long-term
basis will remain the government’s most difficult task.
Therefore, the risk of a significant economic downturn
in China cannot be entirely ruled out.
The Japanese economy is forecast to grow by only
1.0 % in 2019. Demand for capital goods as well as
domestic consumer spending could help drive growth.
The weak yen is also likely to bolster exports.
Emerging markets could see growth on a par with the
previous year, with economic expansion predicted
for India (+ 7.3 %), Russia (+ 1.4 %) and Brazil (+ 2.4 %).
Assumptions used in the outlook
The following outlook relates to a forecast period
of one year and is based on the composition of the
BMW Group during that time. The outlook takes
account of all information available at the time of
reporting, and any which could have an effect on the
overall performance of the Group. The expectations con-
tained in the outlook are based on the BMW Group’s
forecasts for 2019 and reflect its most recent status.
Along with other inputs, they represent a consensus
of opinions of leading organisations, such as economic
research institutes and banks. The basis and principal
assumptions of the forecast are set out below:
In the UK, the ongoing uncertainties in connection with
the Brexit negotiations are impairing the reliability of
forecasts drawn up by businesses. This applies to the
BMW Group as well, which could be further adversely
affected due to the necessary preparations. Notwith-
standing these difficulties, the assumption is that the
UK will leave the EU in an orderly manner.
The BMW Group also anticipates that trade tensions
between the USA and China will continue to be a
source of uncertainty. The Group also assumes that
trade between the EU and the USA will not be subject
to additional tariffs.
The BMW Group and Daimler AG are merging their
mobility services in a new joint venture. Following
approval by the antitrust authorities, the agreement
between the two companies was concluded with effect
from 31 January 2019. It is currently assumed that the
impact on earnings during the forecast period will be
of minor significance.
Economic outlook
Global economic growth is currently forecast at just
over 3 % in 2019. At the same time, the outlook for
the global economy remains exposed to an array of
uncertainties. These include above all the exit negotia-
tions between the EU and the UK as well as the future
foreign trade policy of the US administration. In the
event of unfavourable developments, global growth
could be significantly affected. The debt situation of
Chinese companies as well as the high level of national
debt in Japan and some eurozone countries could
also jeopardise stability on financial markets. Last
but not least, the global economy could also be neg-
atively impacted by excessively restrictive monetary
policies imposed by the Fed in the USA and the ECB
in Europe. Further information on political and global
economic risks is also available in the section Risks
and Opportunities.
The USA is unlikely to maintain a sustainable recovery
in 2019 after the previous year’s dip. Based on current
forecasts, the downward trend in US registrations is
likely to continue (17.0 million units; – 1.6 %).
Additionally, the forecast for China is a decrease of
0.6 % in passenger car registrations to 23.0 million
units. The downward trend on the Japanese auto-
mobile market is set to continue in 2019 (5.0 million
units; – 2.4 %).
Registrations in Russia are expected to rise by around
8.4 % in 2019 to 1.8 million units on the back of
economic recovery. In Brazil, registration figures are
also expected to increase by 11.6 % to 2.3 million units
in the current year.
International motorcycle markets
The BMW Group expects the world’s motorcycle mar-
kets in the 250 cc plus class to grow slightly in 2019.
In Europe, the upward trend is expected to continue
in the major markets of Germany, France, Italy and
Spain. Conversely, the US motorcycle market is fore-
cast to see a slight fall in new registrations in 2019.
International interest rate environment
A moderate slowdown is predicted for the global
economy in 2019. The main reasons for slower growth
are the weaker impact of fiscal incentives in the USA
accompanied by tighter monetary policies in many
emerging markets. Unemployment in many indus-
trialised countries is at a low level.
In view of significantly increasing economic risks,
low inflation and political pressure to maintain loose
monetary policies, the ECB is not expected to raise
its benchmark interest rate from the current record
low of zero per cent until the economic climate has
brightened.
The uncertainty surrounding the ongoing Brexit nego-
tiations will continue to weigh on the UK economy
in 2019. The Bank of England’s monetary policy over
the coming months will be geared to managing the
economic impact of the Brexit negotiations.
86
Report on Outlook,
Risks and
Opportunities
Outlook
Currency markets
Currencies of particular importance for the interna-
tional operations of the BMW Group are the US dollar,
the Chinese renminbi, the Japanese yen and the
British pound. All of these currencies are expected
to remain volatile in 2019.
The US economy is likely to remain strong in 2019,
potentially giving the US Federal Reserve more scope
for further interest rates hikes. The Fed has announced,
however, that it will take a more cautious approach in
2019 than in previous years. After ending its securities
purchasing programme, the ECB indicated the possi-
bility of an interest rate increase in the third quarter
2019 at the earliest, which would mean a departure
from its highly expansive monetary policy. In this
context, the euro could gradually appreciate in value
against the US dollar over the course of 2019.
The economic links between the USA and China sug-
gest that the Chinese renminbi is likely to develop
relatively synchronously to the US dollar. For this
reason, the renminbi is expected to depreciate slightly
against the euro in 2019.
The value of the British pound is currently being
determined to a large extent by the progress of Brexit
negotiations. Accordingly, the most likely scenario is
a volatile sideways movement of the pound against
the euro.
The Japanese central bank’s highly expansionary
monetary policy is unlikely to change in 2019, so
that the euro / yen exchange rate will probably follow
a sideways trend. However, it cannot be ruled out
that the euro will appreciate slightly against the yen.
The currencies of numerous emerging markets could
come under pressure against the US dollar and the
euro, due to the continuing normalisation of monetary
policies in the USA and Europe, which could result in
capital outflows from emerging markets. This applies in
particular to countries such as Russia, Brazil and India.
International automobile markets
After a weaker performance in 2018, a reversal of
this trend in 2019 is not expected for registrations
on international automobile markets (85.5 million
units; – 0.3 %).
Europe’s automobile markets are forecast to see a
slight increase (15.8 million units; + 1.0 %), with contri-
butions to growth coming particularly from Germany
(3.5 million units; + 1.9 %). In France (2.2 million
units; – 0.3 %) and Italy (1.9 million units; – 0.2 %),
automobile markets are likely to contract slightly
in 2019. For the UK, registration forecasts are also
negative (2.3 million units; – 2.3 %).
Combined Management Report 87
Group
Profit before tax: significant decrease expected
Competition on international automobile markets
is set to remain fierce in 2019. Furthermore, politi-
cal and economic developments in Europe remain
increasingly uncertain. Above all, this is due to the
currently unforeseeable impact of Brexit. In addition,
it is difficult to predict how trade tensions between the
USA and the EU on the one hand and the USA and
China on the other are likely to develop. Volatilities
on international currency and raw materials markets
could also have a negative impact on Group profit
before tax. Further information is provided in the
macroeconomic risks and opportunities section of
the Risks and Opportunities Report.
The BMW Group holds a leading position among com-
petitors in various new fields of technology, including
digitalisation and autonomous driving. Given its firm
intention to expand in these areas, investments in
future-oriented projects will remain at a high level.
The BMW Group also plans to electrify drivetrain
systems across its entire model portfolio. Additional
challenges are likely to arise in the future as a conse-
quence of new regulatory measures. The production
network will also be further expanded during the
outlook period. Due to these external challenges and
the upfront expenditure necessary to secure future
operations, the Group’s pre-tax profit is expected to
decrease significantly (2018 adjusted: € 9,627 million).
Workforce size at year-end expected at previous
year’s level
In connection with the projects referred to above, the
need for suitably qualified staff across the BMW Group
will remain high during the current year. According
to current estimates, the size of the workforce is
expected to remain at the previous year’s level (2018:
134,682 employees).
The US Federal Reserve is likely to pursue a more
restrictive monetary policy again in 2019.
In China, fiscal policy will focus on safeguarding the
country’s financial stability. In order to bolster the
economy in the event of an aggressive trade war, the
Chinese central bank could reduce the minimum
reserve ratio and cut taxes further.
Japan’s central bank is likely to maintain its ultra-ex-
pansive monetary policy in order to drive inflation
and stimulate the economy.
Expected consequences for the BMW Group
Future developments on international automobile
markets also have a direct impact on the BMW Group.
While competition could intensify further in contract-
ing markets, new opportunities may appear in growth
regions. Challenges in the competitive environment
will have a significant effect on sales volumes in
some countries. Due to its global business model, the
BMW Group is well placed at all times to capitalise
on any opportunities that present themselves, even at
short notice. Coordination between the Group’s sales
and production networks also enables it to balance
out the impact of unforeseeable developments in the
various regions. Investments in markets important for
the future also form a basis for further growth, while
simultaneously strengthening the global presence of
the BMW Group. Thanks to its three premium brands –
BMW, MINI and Rolls-Royce – the BMW Group
expects the positive development in vehicle deliveries
to continue.
In view of increasingly unpredictable political devel-
opments, actual economic performance in some
regions may deviate from expected trends and out-
comes. Potential sources of political unpredictability
include policies affecting trade and customs tariffs,
security developments and possible further interna-
tional trade conflicts.
Outlook for the BMW Group
Application of International Financial Reporting Stan-
dard IFRS 16 (Leases) is mandatory with effect from
1 January 2019. Comparative figures for the year 2018
are required to be adjusted accordingly. In order to
ensure a transparent presentation of changes in key
financial performance indicators, the outlook shows
values adjusted in accordance with IFRS 16 as well as
the actual values reported for 2018. With regard to key
financial performance indicators for 2019, the outlook
is based on values for 2018 adjusted in accordance with
IFRS 16. Further information on IFRS 16 is provided in
note 5 to the Group Financial Statements.
see
note 5
88
Report on Outlook,
Risks and
Opportunities
Outlook
Automotive segment
Deliveries to customers: slight increase expected
The BMW Group expects a further year-on-year
increase in deliveries of BMW, MINI and Rolls-Royce
brand vehicles and aims to occupy a leading posi-
tion in the global premium segment again in 2019.
Balanced growth in major sales regions will help to
compensate for volatilities in individual markets.
Assuming economic conditions do not deteriorate,
deliveries to customers are forecast to rise slightly to
a new high (2018: 2,490,664 1 units).
The BMW 8 Series Coupé launched in November 2018
and the new X5 models are expected to contribute
to sustained growth. Moreover, in autumn 2018 the
BMW Group announced the launching of numerous
new models during the first quarter of 2019. These
include the seventh generation of the BMW 3 Series
Sedan, the new BMW 8 Series Convertible and the
new BMW X7 and Z4 models. Other new models
will follow over the course of 2019. The Rolls-Royce
Cullinan 2, which has been available to customers since
November 2018, is expected to stimulate demand and
make an important contribution to the success of the
Company.
Fleet CO2 emissions 3: slight decrease expected
Given that the effects of the conversion to WLTP and
the further course of the diesel debate are difficult to
assess, any forecast for 2019 is subject to a particu-
larly high degree of uncertainty. Nevertheless, the
BMW Group aims to reduce its average fleet CO2 emis-
sions slightly for the year 2019 (2018: 128 g CO2 / km).
EBIT margin in target range between 6 and 8 %
expected
Against the background of the challenges referred
to above, an EBIT margin within a range of 6 to 8 %
is expected for the Automotive segment – the core
business of the BMW Group – for the 2019 financial
year (2018: 7.2 %).
Return on capital employed: significant decrease
expected
As stated in the Annual Report 2017, the use of
return on capital employed (RoCE) as a performance
indicator was due to be reviewed, partly in connec-
tion with the introduction of IFRS 16 (Leases). The
review confirmed the significance of RoCE as a key
performance indicator, in particular with a view to
managing profitability and capital efficiency. The use
of this indicator is also closely linked to the Group’s
project-oriented management logic.
1 Includes the
joint venture
BMW Brilliance
Automotive,
Shenyang Ltd.
(2018: 459,581
units).
2 Fuel consumption
and CO2 emis-
sions information
are available
on page 108.
3 EU-28
The Automotive segment’s RoCE is expected to drop
significantly in 2019 (2018: 49.8 %). The decrease is
partly due to the introduction of IFRS 16 (Leases).
Further reasons are higher investments in the elec-
trification of the vehicle fleet, digitalisation, the expan-
sion and rejuvenation of the model portfolio and the
expansion of the production network. Furthermore,
the segment’s earnings trend is likely to have a damp-
ening effect on RoCE. However, the long-term target
RoCE of at least 26 % for the Automotive segment will
be surpassed.
Motorcycles segment
Deliveries to customers: solid increase expected
The BMW Group expects business in the Motorcycles
segment to develop positively in the current year.
Business is predicted to benefit from the extensive
measures taken to rejuvenate the segment’s product
range in the previous year as well as from the array
of new models presented at international motorcy-
cle trade fairs in autumn 2018. The addition of the
mid-class C 400 GT Scooter has also expanded the
segment’s product range designed for the urban
environment. Overall, a solid increase in deliveries
of BMW motorcycles to customers is forecast for 2019
(2018: 165,566 units).
EBIT margin in target range between 8 and 10 %
expected
The EBIT margin in the Motorcycles segment in 2019
is forecast to lie within the target range between 8 and
10 % (2018: 8.1 %).
Return on capital employed: solid increase expected
Due to the product initiatives described above, the
Motorcycles segment is expected to generate a solid
year-on-year increase in RoCE in 2019 (2018: 28.4 %).
The long-term target RoCE of 26 % for the Motorcycles
segment will therefore be surpassed.
Financial Services segment
Return on equity expected at previous year’s level
The BMW Group forecasts a stable business per-
formance for the Financial Services segment in the
financial year 2019. The return on equity is expected
to remain at the previous year’s level (2018: 14.8 %).
Combined Management Report Overall assessment by Group management
Business is expected to be more volatile in the finan-
cial year 2019. While numerous new automobile and
motorcycle models as well as an expanded range of
individual mobility-related services will provide addi-
tional momentum, the various challenges described
above are likely to have an offsetting impact. Research
and development expenses will remain at a high level in
view of future-oriented projects. Accordingly, Group
profit before tax is forecast to decrease significantly.
Automobiles segment deliveries to customers should
increase slightly and reach a new record level. At the
same time, fleet carbon dioxide emissions are forecast
to drop slightly. The Group’s targets are to be met
with a workforce size at the previous year’s level.
The Automotive segment’s EBIT margin in 2019 is
expected to lie within the range of between 6 and 8 %.
A significant decrease is forecast for the RoCE of the
Automobiles segment. The RoE for the Financial
Services segment should remain at the previous
BMW Group key performance indicators
• 64
Group
Profit before tax
Workforce at year-end
Automotive seGment
Deliveries to customers 4
Fleet emissions 5
EBIT margin
Return on capital employed
motorcycles seGment
Deliveries to customers
EBIT margin
Return on capital employed
FinAnciAl services seGment
89
year’s level. However, both performance indicators
will be above their long-term targets of 26 % (RoCE)
and 14 % (RoE 1) respectively. Deliveries to customers
in the Motor cycles segment are forecast to show a solid
increase, with an EBIT margin within the target range
of between 8 and 10 % and the RoCE also showing a
solid increase on the previous year.
Depending on the political and economic situation
and the risks and opportunities described below,
actual business performance could differ from current
expectations.
Growing uncertainty, particularly with regard to
political developments – such as Brexit and inter-
national trade and customs policies – may cause
economic developments in many regions to deviate
from expected trends and outcomes. This would also
have a significant impact on the business performance
of the BMW Group.
2018
reported
2018
2
adjusted
2019
Outlook3
€ million
9,815
9,627
significant decrease
134,682
units
2,490,664
g CO2 / km
%
%
units
%
%
128
7.2
49.8
165,566
8.1
28.4
in line with last
year’s level
slight increase
slight reduction
between 6 and 8
significant decrease
solid increase
between 8 and 10
solid increase
in line with last
year’s level
–
–
–
–
–
–
–
–
–
Return on equity
%
14.8
1 Adjusted with effect from the financial year 2018.
2 Adjusted in accordance with IFRS 16.
3 Based on adjusted outlook.
4 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2018: 459,581 units).
5 EU-28.
90
Report on Outlook,
Risks and
Opportunities
Risks and
Opportunities
RISKS AND
OPPORTUNITIES
As a worldwide-leading provider of premium cars,
motorcycles and mobility services, as well as related
financial services, the BMW Group is exposed to
numerous uncertainties and change. Making full
use of the opportunities arising out of change is a
fundamental basis of the Group’s corporate success.
In order to achieve growth, profitability, efficiency
and continued sustainable activities going forward,
the BMW Group must consciously assume risks.
Management of opportunities and risks is essential for
the Group to react appropriately to changes in political,
economic, technical or legal conditions. Opportunities
and risks which are likely to materialise are taken into
account in the Outlook Report. The following sections
focus on potential future develop ments or events,
which could result in a positive (opportunity) or a
negative (risk) deviation from the BMW Group’s out-
look. The earnings impact of risks and opportunities is
assessed separately without offsetting. Opportunities
and risks are assessed with respect to a medium-term
period of two years.
Risk management in the BMW Group
• 65
As part of the risk management process, all individual
and cumulative risks that represent a threat to the
success of the business are monitored and managed.
Any risks capable of posing a threat to the going-
concern status of the BMW Group are generally
avoided. Where no specific reference is made, oppor-
tunities and risks relate to the Automotive segment.
The scope of entities consolidated in the Report on
Risks and Opportunities corresponds to the scope
of consolidated entities included in the BMW Group
Financial Statements.
Risk management system
The objective of the risk management system, and
the main function of risk reporting, is to identify,
measure and, where possible, actively manage internal
or external risks that could threaten the attainment of
the Group’s corporate targets. The risk management
system covers all significant and existential risks
to the Group. Group risk management focuses on
the criteria of effectiveness, practicability and com-
pleteness. Responsibility for risk reporting is not
allocated to a centralised function, but is part of the
task of each employee and manager, according to their
individual function. According to Group-wide rules,
every employee and manager has a duty to report risks
through the relevant reporting channels.
Group-wide
risk management
Identification
Analysis and
Measurement
Effectiveness
Practicability
Compliance
Committee
Reporting /
Monitoring
Completeness
Risk
Management
Steering
Committee
Controlling
Supervisory
Board
Board of
Management
Measures
Group
Audit
Internal Control System
Combined Management Report 91
Overall risk assessment is performed in conjunction
with the calculation of risk-bearing capacity. For this
purpose, worst-case risks are aggregated using a
value-at-risk model, taking correlation effects into
account and compared with the asset cushion. The
segment’s risk-bearing capacity is regularly controlled
through an integrated limit system for the various
risk categories.
The risk management system is regularly examined
by Group Internal Audit. An ongoing exchange of
experience with other companies ensures that new
insights are incorporated in the risk management
system of the BMW Group, thus providing for con-
tinual improvement. Training sessions, development
programmes and information events are regularly
conducted across the BMW Group, particularly within
the risk management network. These measures are
essential ways of preparing those involved in the
process for new or additional demands.
In addition to comprehensive risk management,
sustainable business practice constitutes one of the
core strategic principles of the company. Risks or
opportunities relating to sustainability issues are
considered by the Sustainability Committee. Resulting
strategic options and measures are put forward to
the Sustainability Board, which comprises the entire
Board of Management. Where necessary, risk aspects
may be integrated within the Group-wide risk net-
work. The composition of the Risk Management
Steering Committee and the Sustainability Committee
ensures that risk and sustainability management are
closely coordinated.
In order to comply with the CSR Directive Imple-
mentation Act, a review of risks with impact on
non-financial aspects referred to in the law was
conducted as part of the reporting process for the
Group’s Non-Financial Declaration. Significant risks
within the meaning of the law are those relating
to business activities, business relationships and
products and services of the BMW Group which are
highly likely to have a serious adverse impact. No
significant risks were identified during the review.
The Group’s Non-Financial Declaration is provided in
the Sustainable Value Report 2018, which is available
on the Internet at
www.bmwgroup.com / svr.
The Group risk management system is organised
formally as a decentralised, company-wide network
and is steered by a centralised risk management
function. Every BMW Group division is represented
within the risk management organisation by Network
Representatives. This formal structure reinforces the
network’s visibility and underlines the importance
of risk management within the BMW Group. Roles,
responsibilities and tasks of the centralised risk man-
agement function and the Network Representatives
are clearly described, documented and understood.
In view of the dynamic growth of business and the
increasingly volatile environment, the BMW Group
regularly reviews its risk management system for
effectiveness and appropriateness.
Risk management as a whole comprises the Risk
Management Steering Committee, the Compliance
Committee, the Internal Control System and the
Group Internal Audit.
During 2018, the risk management system focused
on two main areas. Firstly, generic risk models were
developed for all aspects of the business with a view
to ensuring that recurring individual risks are better
assessed. These risk models were validated by mea-
suring specific risks.
Secondly, procedures to ensure that all risk scenarios
are considered were further tightened. Instead of
quantifying risks by means of a single-point estimate
based on the net loss and probability of occurrence,
risks are assessed using the loss distribution approach
based on expected and worst-case values, thereby
enabling better comparability of risk categories for
both internal and external reporting purposes.
Risk management process
The risk management process covers the entire Group
and comprises the early identification of risks, detailed
analysis and risk assessment, the coordinated use of
relevant management tools as well as monitoring and
evaluation of measures taken.
Significant risks reported from within the network are
firstly presented for review to the Risk Management
Steering Committee, chaired by Group Controlling.
After review, the risks are reported to the Board of
Management and the Supervisory Board. Risks are
classified according to their potential impact on
earnings and risk-bearing capacity. The expected risk
and worst-case amounts are assessed in each case net
of risk mitigation measures.
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Opportunities
In the Financial Services segment risk management
also addresses regulatory requirements, such as Basel
III. Internal methods to identify, measure, manage and
monitor risks within the Financial Services segment
comply with national and international standards.
Risk management in the Financial Services business is
based on the risk strategy, the Internal Capital Adequacy
Assessment Process Framework and a set of rules
comprising strategic principles and guidelines. The
risk management process is ensured organisationally
through a clear division between front- and back-office
activities and a comprehensive internal control system.
The main instrument of risk management within the
Financial Services segment is ensuring the Group’s
risk-bearing capacity. At all times, risks in the sense of
unexpected losses must be covered. This is achieved by
means of an asset cushion in the form of equity capital
derived from the entity’s risk appetite. Unexpected
losses are measured according to various value-at-risk
models, which are validated at regular intervals. Risks
are aggregated after taking account of correlation
effects. In addition to assessing the Group’s ability to
bear risk under normal circumstances, stress scenarios
are also examined. The segment’s risk-bearing capacity
is regularly controlled through an integrated limit
system for the various risk categories.
Risk measurement
Risks are classified as high, medium or low, based on
their significance with respect to results of operations,
financial position and net assets and to performance
indicators of the BMW Group. The impact of risks is
measured and reported net of risk mitigation mea-
sures (net basis).
The overall impact of a risk’s occurrence on the results
of operations, financial position and net assets on
the basis of worst-case scenarios for the two-year
assessment period is classified as follows:
Class
Low
Medium
High
Potential earnings impact
> € 0 – 500 million
> € 500 – 2,000 million
> € 2,000 million
In the following sections, earnings impact is used
consistently to cover the overall impact on results of
operations, financial position and net assets.
The risk amount is the basis for the classification
of risk levels at the BMW Group. These have been
revised as part of the further development of the risk
management system. The risk amount corresponds to
the average earnings impact, taking into account prob-
ability of occurrence and risk mitigation measures.
Overall, the following criteria apply for the purposes
of classifying the risk amount:
Class
Low
Medium
High
Risk amount
> € 0 – 50 million
> € 50 – 400 million
> € 400 million
Opportunity management system and
opportunity identification
A dynamic market environment also gives rise to
opportunities. The BMW Group continually monitors
macroeconomic trends as well as developments within
the sector and overall environment. This includes
external regulations, suppliers, customers and com-
petitors. Identifying opportunities is an integral part
of the strategic planning process of the BMW Group.
The Group’s product and service portfolio is continually
reviewed on the basis of these analyses. This results,
for example, in new product projects being presented
to the Board of Management for consideration.
Continuous monitoring of major business processes
and strict cost controls are essential for ensuring strong
profitability and return on capital employed. Probable
measures to increase profitability are incorporated in
the outlook. The implementation of modular-based
and common architectures, for instance, allows iden-
tical components to be deployed increasingly across
models and product lines. This reduces development
costs and investment on the series development of
new vehicles and contributes positively to profitability.
In addition, it also supports economies of scale in
production costs and increases production flexibility.
Moreover, a more competitive cost basis opens up
opportunities to enter new market segments.
The implementation of identified opportunities is
undertaken on a decentralised basis within the rele-
vant functions. The significance of opportunities for
the BMW Group is classified on a qualitative basis in
the categories “significant” and “insignificant”.
Combined Management Report Risks and opportunities
The following table provides an overview of all risks
and opportunities and indicates their significance
for the BMW Group. Overall, no risks which could
threaten the continued existence of the BMW Group
were identified either at the balance sheet date or at
the date on which the Group Financial Statements
were drawn up.
risks A nd opportunities
Macroeconomic risks and opportunities
Strategic and sector risks and opportunities
Changes in legislation and regulatory requirements
Market developments
Risks and opportunities relating to operations
Production and technology
Purchasing
Sales and marketing
Information, data protection and IT
Financial risks and opportunities
Foreign currencies
Raw materials
Liquidity
Pension obligations
Risks and opportunities relating to the provision of financial services
Credit risk
Residual value
Interest rate changes
Operational risks
Legal risks
93
Risks or opportunities which could, from today’s
perspective, have a significant impact on the results
of operations, financial position and net assets of the
BMW Group are described below.
Risks
Opportunities
Classification of
risk amount
Change compared
to prior year*
Classification
Change compared
to prior year
High
High
High
Medium
High
Low
High
High
Medium
Low
High
Medium
High
Medium
Medium
Medium
Stable
Insignificant
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable*
Stable*
Stable
Stable*
Stable
Stable*
Stable*
Stable*
Stable
Insignificant
Insignificant
Insignificant
Insignificant
Insignificant
Insignificant
Significant
Significant
–
Significant
Significant
Significant
Significant
–
–
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
–
Stable
Stable
Stable
Stable
–
–
* Prior year classifications have been amended in line with the revision of the risk modelling described in the “Risk management system” section and the revision of the measurement of risk amount described in
the “Risk measurement” section. In the case of risks for which prior year amounts have been reclassified, risk amounts have been classified to a higher level than reported in the Annual Report 2017.
Macroeconomic risks and opportunities
Economic conditions influence business performance
and hence the results of operations, financial position
and net assets of the BMW Group. Unforeseen dis-
ruptions in global economic relations can have highly
unpredictable effects. Macroeconomic risks can lead
to reduced purchasing power in the countries and
regions affected and lead to reduced demand for the
products and services offered by the BMW Group.
Macroeconomic risks could – due to sales volume
fluctuations – have a high earnings impact over the
two-year assessment period. Overall, the risk amounts
attached to macroeconomic risks are classified as high.
Macroeconomic risks are evaluated on the basis of
historical data and cash-flow-at-risk scenario analyses.
In view of the political events of recent years, global
economic developments continue to be subject to a
high degree of uncertainty, in particular with respect
to potential barriers to global trade. A reorientation
of US economic policy, changes within the EU and
possible economic agendas by parties in EU countries
that are critical of globalisation and could therefore
jeopardise stability could lead to more restrictive trade
practices in the coming years.
A possible introduction of further trade barriers,
including anti-dumping customs duties and duties
aimed at protecting national security by the US
administration, could have a significantly adverse
impact on the BMW Group’s operations through less
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Opportunities
favourable conditions for importing vehicles. Moreover,
countermeasures by the USA’s trading partners
could slow down global economic growth and have
a greater-than-expected adverse impact on the export
of vehicles produced in the USA. The BMW Group’s
“production follows the market” strategy involves local
production both in the USA and with other important
trade partners. Regional production reduces the exist-
ing risk of trade barriers. Nevertheless, any increase
in trade barriers would have an adverse impact on
the BMW Group.
The impending Brexit could have a long-term adverse
impact on the BMW Group, particularly as a result
of increased trade barriers in the form of customs
duties in relation to the European single market. Any
such trade barriers could have a negative impact on
volumes and costs both for vehicles and components
produced in the EU for the UK as well as those pro-
duced in the UK for the European market. In extreme
cases, this could also result in production losses due
to delays in customs clearance. In addition, Brexit
could lead to reduced customer spending in the wake
of weaker economic performance, particularly in
the UK. In the short and medium term, uncertainty
regarding the outcome of the negotiations with the
EU could exacerbate these factors and cause further
negative currency effects. A possible further economic
downturn of countries in the EU could also potentially
reduce growth prospects for the BMW Group. European
integration with a unified economic and currency area
is an important pillar of economic stability in Europe.
The transition in China from an investment-driven to
a consumer-driven economy is associated with slower
growth rates and, potentially, greater instability in
the short to medium term on financial markets. If the
Chinese economy were to grow at a significantly slower
pace than expected, the consequence would be not
only a decline in automobile sales, but also, potentially,
lower demand for raw materials, which would have a
negative impact above all on emerging economies such
as Brazil, Russia or South Africa. Any further drop in
raw material prices could result for the BMW Group
in lower demand from these countries. Turmoil on
the Chinese property, stock and banking markets
and an overly rapid increase in interest rates by the
US Federal Reserve could pose considerable risks for
global financial market stability. Such developments
could lead to greater currency fluctuations and have
a negative impact on emerging markets in particular.
Furthermore, increasing political unrest, military
conflicts, terrorist activities, natural disasters or
pandemics could have a lasting negative impact on
the global economy and international capital markets.
The BMW Group addresses macroeconomic risks pri-
marily by internationalising its sales and production
structures, in order to minimise the extent to which
earnings depend on risks in individual countries
and regions. Flexible sales and production processes
within the BMW Group increase the limited ability
to react quickly to regional economic developments.
Should the global economy develop significantly bet-
ter than presented in the outlook, macroeconomic
opportunities could arise for the BMW Group’s
revenues and earnings. Significantly stronger GDP
growth in China, demand-oriented reforms within the
eurozone, a cancellation of Brexit and intensified trade
relations between the EU and the UK, further growth
stimulus through the tax reform in the USA or more
robust consumer spending in emerging markets due to
rising raw material prices could result in significantly
stronger sales volume growth, reduced competitive
pressures and corresponding improvement in pricing.
The planned expansion of production capacities will
enable emerging opportunities to be exploited to a
greater degree. Macroeconomic opportunities that
could generate a sustainable impact on earnings are
currently classified by the BMW Group as insignificant.
Strategic and sector risks and opportunities
Changes in legislation and regulatory requirements
The sudden introduction of more stringent legislation
and regulations, particularly with regard to emissions,
safety and consumer protection as well as regional
vehicle-related purchase and usage taxes, represents
a significant risk for the automobile industry. Country-
and sector-specific trade barriers can also change at
short notice. A sudden tightening of regulations in
any of these areas can necessitate significantly higher
investments and ongoing expenses or influence cus-
tomer behaviour. Risks from changes in legislation
and regulatory requirements could have a high impact
on earnings over the two-year assessment period.
Compared to the previous year, the potential impact
on earnings has increased. The risk amount attached
to these risks is classified as high. Compared with the
previous year, risks arising from the further tightening
of emissions laws are assessed as being stable.
Combined Management Report 95
Market development
In addition to economic factors and sector-specific
political conditions, increasingly fierce competition
among established manufacturers and the emergence
of new competitors could also have effects which are
difficult to predict. Unforeseen consumer preferences
and changes in brand perceptions can give rise to
opportunities and risks. If market risks were to mate-
rialise, they could have a high earnings impact over
the two-year assessment period. The risk amount is
classified as high.
Intense competition, particularly in Western Europe,
the USA and China, is a potential cause for lower
demand and for fluctuations in the regional distribu-
tion and composition of demand for BMW, MINI and
Rolls-Royce brand vehicles and for mobility services.
Greater competition could put pressure on selling
prices and margins. The BMW Group successfully
completed the conversion to the new WLTP test pro-
cedure in 2018. Markets in Europe were nevertheless
subject to a high degree of distortion on the supply
side and pressure on selling prices as a result of the
conversion. Changes in customer behaviour can also
be brought about by changes in attitudes, values,
environmental factors, and fuel or energy prices. In
order to determine price and margin risks, a scenario
approach is used. The BMW Group’s flexible sales and
production processes enable risks to be reduced and
newly arising opportunities in market and product
segments to be taken.
Local restrictions affecting product usage in specific
sectors may limit BMW Group sales in individual mar-
kets. In some urban areas, for instance, local measures
are being introduced, including entry restrictions,
congestion charges or, in some situations, highly
restrictive registration rules. These may impact local
demand for the BMW Group vehicles affected and
hence have a negative impact on sales, margins and,
possibly, the residual values of these vehicles. The
BMW Group addresses this risk by offering locally
emissions-free vehicles, such as the BMW i3*, which
benefit from state subsidies and exemptions.
At present, the BMW Group sees increasingly
restrictive vehicle emissions regulations, particularly
for conventional drivetrain systems, not only in the
world’s major markets (Europe, North America and
China), but also in other markets such as India and
Brazil. In particular, the combination of newly intro-
duced measurement procedures to reflect standard
driving cycles (WLTP) and Real Driving Emissions
(RDE) tests to reflect actual emissions on the road
on the one hand, and significantly lower emissions
thresholds on the other, pose major challenges to the
automotive sector. The BMW Group is addressing this
risk with its Efficient Dynamics concept and is playing
a pioneering role in reducing both fuel consumption
and emissions within the premium segment. One
area of focus of the BMW Group is the systematic
electrification of all brands and model series. The
product range has been increasingly expanded with
electric drivetrain systems in BMW i vehicles since
2013 and with plug-in-hybrid technologies since 2015.
These technologies have contributed to the fulfilment
of legal standards and requirements with regard to
vehicle emissions.
Further risks can result from the tightening of existing
import and export regulations. These lead primarily
to additional expenses but can also restrict imports
and exports of vehicles or parts.
An established regulatory framework for innovative
mobility solutions as well as government incentives
are important prerequisites for introducing product
innovations, such as autonomous driving, and for
scaling up the range of electric mobility offerings. For
the electrified vehicles of the BMW Group a faster
expansion of charging infrastructure could increase
acceptance and help boost sales of planned or recently
introduced product innovations compared to forecast.
This includes implementation of the 360° ELECTRIC
portfolio in the field of electric mobility and collabo-
ration with Toyota on hydrogen fuel cell technology.
The BMW Group’s earnings could also be positively
affected in the short to medium term by changes in
trading policies. A possible reduction in tariff barriers,
import restrictions or direct excise duties could lower
the cost of materials for the BMW Group, and enable
products and services to be offered to customers at
lower prices. Further opportunities for the earnings
performance of the BMW Group from changes in
legislation and regulatory requirements compared
to the outlook are classified as insignificant.
* Fuel consumption
and CO2 emissions
information are
available on
page 108.
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Opportunities
customer wishes to be met appropriately and allow any
backlogs caused by temporary interruptions in pro-
duction to be made up within a short to medium time
frame. Other measures worthy of mention include the
technical fire protection and anti-flooding measures
undertaken at the San Luis Potosí plant in Mexico.
Risks arising from business interruptions due to fire
in production facilities or at suppliers are also appro-
priately covered with insurance companies of good
credit standing. Measures taken in connection with
the current challenges posed by Brexit include build-
ing up adequate levels of safety stocks and increasing
flexibility along the supply chain.
In order to meet high standards in product quality
and achieve favourable external ratings (e. g. for
product safety), reduce statutory and non-statutory
warranty obligations and keep down follow-up costs
arising from other changes in planning assumptions,
it may be necessary to incur a higher level of expen-
diture than originally forecast. If warranty expenses,
including provisions for recalls, were to exceed the
amounts previously recognised and expected, higher
allocations to provisions in connection with goodwill
and warranty measures would have a negative impact
on the BMW Group. Such an allocation, for example,
to the warranty provision was made in 2018, among
other things in connection with the exhaust gas recir-
culation cooler. In addition, availability of products
may be limited, particularly at the start of production
for new vehicle projects. These risks are mitigated
through regular audits and the continual improve-
ment of quality management, which ensures the high
standard of quality. The BMW Group also recognises
appropriate accounting provisions for statutory and
non-statutory warranty obligations. These reduce the
risk to earnings, as they are already taken into account
in the outlook. It cannot be ruled out, however, that
damages could arise that are either not covered or not
fully covered by provisions.
Further information on risks related to provisions for
statutory and non-statutory warranty obligations is pro-
note 33 to the Group Financial Statements.
vided in
see
notes 33
New opportunities are continuously being sought to
create even greater added value for customers than
currently expected, and thereby to realise signif-
icant opportunities with respect to sales growth and
pricing. Further development of the product and
mobility portfolio and expansion in growth regions
offer the most important medium- to long-term
growth opportunities for the BMW Group. Continued
growth depends above all on the ability to develop
innovative products and services and bring them to
market. In this context, the BMW Group will focus
on developing autonomous driving and on expanding
mobility services via the planned joint venture with
the Daimler Group. If the negative impact of the cur-
rent competitive situation is reduced more quickly
than expected, additional opportunities will arise
for the BMW Group. Compared to the assumptions
made in the outlook, the BMW Group expects these
opportunities to have no significant earnings impact
over the two-year assessment period.
Risks and opportunities relating to operations
Risks and opportunities relating to production
and technologies
Risks relating to production processes and technology
fields are particularly apparent in potential sources
of interruptions in production or additional costs to
comply with quality standards under changed market
conditions. If risks arising from production processes
and technologies were to materialise, they could have
a high earnings impact over the two-year assessment
period. The corresponding risk amounts are classified
as medium.
Production stoppages and downtimes due to fire,
machine and tooling breakdowns, IT disruptions,
damage to infrastructure, power failures, transporta-
tion and logistical disruptions represent risks which
the BMW Group addresses through appropriate
precautions.
Production structures and processes are designed
from the outset with measures to minimise potential
damage and the probability of occurrence. The inter-
changeability of production facilities, preventative
maintenance and management of spare parts across
sites play an important role within the production
network. Risk is also reduced through flexible working
hour models and working time accounts as well as the
ability to build individual split models or engine types
with a high degree of flexibility – either additionally or
alternatively – at plants of the BMW Group, depend-
ing on requirements. These various features enable
Combined Management Report The BMW Group sees opportunities in production
processes and technology fields primarily through
the competitive edge gained from mastering new
and complex technologies. Opportunities could
arise as a result of further technological innovations
related to products or processes, as well as from
organisational changes which improve efficiency or
increase competitiveness of the BMW Group. The
early integration of WLTP-related requirements into
production and sales planning systems, for instance,
enabled the BMW Group to offer its fleet customers
the usual product range without interruption. Given
the long lead times in developing new products and
processes, additional opportunities are not expected
to have a significant impact on earnings during the
outlook period.
Risks and opportunities relating to purchasing
Purchasing risks relate primarily to supply risks
caused by the failure of a supplier as well as risks
associated with the quality of bought-in parts. Pro-
duction problems incurred by suppliers could lead to
increased expenditure for the BMW Group through
to interruptions in production and a corresponding
reduction in sales. The increasing complexity of the
supplier network, especially at the level of lower tier
suppliers, whose operations can only be indirectly
influenced by the BMW Group, is a further poten-
tial cause of downtimes at supplier locations. The
increased threat of cyberattacks along the supplier
chain also give cause for a more critical assessment of
the risk situation, in this case in anticipation of future
potential risks relating to security of supply and the
protection of internal know-how. If purchasing risks
were to materialise, they could have a high earnings
impact over the two-year assessment period. The risk
amount attached to purchasing risks is classified as high.
Close cooperation between carmakers and suppli-
ers in the development and production of vehicles
and the provision of services generates economic
benefits, but also increased dependency. Potential
reasons for the failure of individual suppliers include
in particular increased IT-related risk, non-compliance
with sustainability or quality standards, insufficient
financial strength of a supplier, the occurrence of
natural hazards, fires and insufficient supply of raw
materials. In order to ensure a uniform level of security
for all parties concerned along the added value / supply
chain, the BMW Group focuses on obtaining evi-
dence of appropriate IT security certification from
its suppliers. As part of supplier pre-selection, the
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BMW Group checks for compliance with the sus-
tainability standards for the supplier network. This
includes compliance with internationally recognised
human rights and applicable labour and social stan-
dards. The principal means for ensuring compliance
with the Sustainability Standards is a three-stage risk
management system for sustainability. In addition,
the technical and financial capabilities of suppliers
are monitored, especially where modular-based
production is concerned. Supplier sites are assessed
for exposure to natural hazards, such as floods or
earthquakes, in order to identify supply risks at an
early stage and implement appropriate precautions.
Fire risks at series suppliers are evaluated by means
of questionnaires and selective site inspections. In
order to minimise supply risks of raw materials, the
BMW Group draws up measures to reduce the use of
raw materials or to substitute alternative raw materials.
The BMW Group pays particular attention to the quality
of the parts built into its vehicles. In order to attain a
very high level of quality, it may become necessary to
invest in new technological concepts or discontinue
planned innovations, with the result that the cost of
materials could exceed levels accounted for in the
outlook. By monitoring and developing global supplier
markets, the BMW Group continuously strives to
optimise its competitiveness by working together
with the world’s best product and service providers.
Within the Purchasing and Supplier Network, oppor-
tunities arise above all in the area of global sourcing
through increased efficiency and the use of innova-
tions developed by suppliers, which can lead to a
broader range of products. Making full use of location-
specific cost factors, in particular through local supplier
structures in close proximity to new and existing
BMW Group production plants and the introduction
of new, innovative production technologies, could lead
to lower cost of materials for the BMW Group. One
goal of the BMW Group is to manufacture battery cells
in Europe and to establish the relevant value chain for
cell production. In order to secure the BMW Group’s
electrification strategy, a contract was signed with
CATL (Contemporary Amperex Technology) for the
supply of battery cells. The plant is currently under
construction in Thuringia. Integration of previously
unidentified innovations from the supplier market
in the Group’s product range could provide a further
source of opportunities. The BMW Group offers inno-
vative suppliers numerous possibilities for creating
specific contractual arrangements which are attractive
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for those developing innovative solutions. At regular
intervals, the BMW Group honours its most inventive
suppliers with the Supplier Innovation Award. The
BMW Group expects these opportunities to have no
significant earnings impact over the assessment period
as compared to the assumptions made in the outlook.
Risks and opportunities relating to sales and marketing
In order to sell its products and services, the
BMW Group employs a global sales network, com-
prising primarily independent dealerships, branches,
subsidiaries and importers. Any threat to the contin-
ued activities of parts of the sales network would entail
risks for the BMW Group. The occurrence of sales
and marketing risks is associated with a low earnings
impact over the two-year assessment period. The risk
level is classified as low. New developments in the
field of digital communication and connectivity in par-
ticular offer new opportunities for the BMW Group’s
brands. Since 2017 BMW CarData has made it possible
to provide customised service offers to BMW drivers
based on data from the vehicle. If customers wish
to use a specific service and actively consent to the
release of their telematics data, requesting companies
receive the data they need for the service in encrypted
form via BMW’s secure backend database. This infor-
mation provides the basis for customised, data-based
and innovative service options. Additional opportu-
nities could arise if new sales channels contribute to
greater brand reach to customer groups than currently
envisaged in the outlook. Digital communication
and connectivity enable consumers to be reached
on a more targeted and individualised basis, thus
strengthening long-term relationships and brand
loyalty. This can lead to a more intense product and
brand experience for customers, which could result
in higher sales volume and have a positive impact on
revenues and earnings. The BMW Group invests in
advanced marketing concepts in order to intensify
customer relationships. The BMW Group estimates
the earnings impact as insignificant over the two-year
assessment period as compared to the assumptions
made in the outlook.
Information, data protection and IT
Increasing digitalisation across all areas of business
places considerable demands on the confidentiality,
integrity and availability of electronically processed
data and the associated use of information technology
(IT). In addition to the increased threat of cybercrime,
regulations covering the handling of personal data are
becoming more stringent, for example as a result of
the EU General Data Protection Regulation. If risks
relating to information security, data protection and
IT were to materialise, they could have a high earnings
impact over the two-year assessment period. Despite
extensive security measures, the risks in this area are
classified as high.
In addition to cyberattacks and direct physical inter-
vention, lack of knowledge or misconduct on the
part of employees may also represent a danger to the
confidentiality, integrity and availability of informa-
tion, data and systems. Direct consequences include
expenditure required to limit the immediate damage
and to restore systems promptly. Negative impacts on
revenue due to the non-availability of products and
services or disruptions in the production of compo-
nents or vehicles are also possible. A further indirect
result could be reputational damage.
Great importance is attached to the protection of the
confidentiality, integrity and availability of business
information as well as employee and customer data,
for instance as a result of unauthorised access or
misuse. Data security is an integral component of
all business processes and is aligned with the Inter-
national Standard ISO / IEC 27001. As part of risk
management, information security, data protection
and IT risks are systematically documented, allocated
appropriate measures by the departments concerned
and continuously monitored with regard to threat
level and risk mitigation. Regular analyses and controls
as well as rigorous security management ensure an
appropriate level of security. Despite continuous
testing and preventative security measures, it is impos-
sible to eliminate risks completely in this area. All
employees are required to treat with care information
such as confidential business, customer and employee
data, to use information systems securely and handle
risks with transparency. Group-wide requirements
are documented in a comprehensive set of principles,
guidelines and instructions, such as, for example, the
Privacy Corporate Rules for handling personal data.
Regular communication and awareness-raising mea-
sures create a high level of security and risk awareness
among those involved. Employees receive training to
ensure compliance with the applicable requirements
and internal rules. With regard to cooperations and
business partnerships, the BMW Group protects its
intellectual property as well as customer and employee
data through clear instructions on information secu-
rity and data protection and the use of information
technology. Information pertaining to key areas of
expertise as well as sensitive personal data are subject
to particularly stringent security measures. Technical
data protection incorporates industry-wide standards
and good practices. Responsibility for information
security and data protection lies for each Group
entity with the Board of Management or relevant
management team.
Combined Management Report 99
Risks and opportunities relating to raw materials
As a large-scale manufacturing company, the BMW Group
is exposed to purchase price risks, particularly in rela-
tion to raw materials used in vehicle production.
The analysis of raw material price risk is based on
planned purchases of raw materials and components
containing those raw materials. If risks relating to raw
materials prices were to materialise, they could have
a medium earnings impact over the two-year assess-
ment period. A medium risk level is attached to risks.
Significant opportunities could arise if raw materials
prices developed favourably for the BMW Group.
Changes in commodity prices are monitored on the
basis of a well-defined management process. The
principal objective is to increase planning reliability
for the BMW Group. Price fluctuations for precious
metals (platinum, palladium, rhodium), non-ferrous
metals (aluminium, copper, lead, nickel) and, to some
extent, for steel and steel ingredients (iron ore, coking
coal) and energy (gas, electricity) are hedged using
financial derivatives and supply contracts with fixed
pricing arrangements.
Liquidity risks
The major part of the Financial Services segment’s
credit financing and leasing business is refinanced on
capital markets. Liquidity risks can arise in the form
of rising refinancing costs or from restricted access to
funds as a consequence of the general market situation.
If liquidity risks were to materialise, they would be
likely to have a low earnings impact over the two-year
assessment period. The risk amount associated with
liquidity risk, including the risk of the BMW Group’s
rating being downgraded, which would lead to an
increase in financing costs, is classified as low.
With the advance of digitalisation, the BMW Group
is improving the customer experience and its existing
lines of business. At the same time, new digital busi-
ness segments are emerging, which are mainly focused
on information technology. The development and
provision of digital services for customers, increased
vehicle connectivity and autonomous driving solutions
are opening up new opportunities. Through BMW
ConnectedDrive and BMW CarData the range of
services and apps on offer to customers is constantly
being expanded and updated. Starting in March 2019,
the BMW Intelligent Personal Assistant will provide
customers with an intelligent, digital character that
enables voice access to functions and information. The
BMW Group expects these opportunities to have no
significant earnings impact over the assessment period
as compared to the assumptions made in the outlook.
Financial risks and risks relating to the use of
financial instruments
Currency risks and opportunities
As an internationally operating enterprise, the
BMW Group conducts business in a variety of cur-
rencies, thus giving rise to currency risks and oppor-
tunities. A substantial portion of Group revenues,
purchasing and funding occur outside the eurozone
(particularly in China and the USA). Cash-flow-at-
risk models and scenario analyses are used and
continuously developed to measure currency risks
and opportunities. If currency risks were to materi-
alise, they could be associated with a high earnings
impact over the two-year assessment period. The risk
level attached to currency risks is high. Significant
opportunities can arise if currency developments are
favourable for the BMW Group.
Operational currency management is based on the
results of currency risk analyses. The BMW Group
manages currency risks at both strategic (medium
and long term) and operational level (short and
medium term). Medium- and long-term measures
include increasing production volumes and purchase
volumes in foreign currency regions (natural hedging).
Currency risks are managed in the short to medium
term and for operational purposes by means of hedg-
ing on financial markets. The principal objective of
this currency management process is to increase
planning reliability for the BMW Group. Hedging
transactions are entered into only with financial
partners of good credit standing. Opportunities are
also secured through the use of options during specific
market phases.
100
Report on Outlook,
Risks and
Opportunities
Risks and
Opportunities
Based on the experience of the financial crisis, a min-
imum liquidity concept has been drawn up, which is
rigorously adhered to and continuously developed.
Use of the “matched funding principle” to finance the
Financial Services segment’s operations eliminates
liquidity risks to a large extent. Solvency is assured at
all times throughout the BMW Group by maintaining
a liquidity reserve and by the broad diversification
of refinancing sources. Regular measurement and
monitoring ensure that cash inflows and outflows for
the various maturities and currencies offset each other.
This approach is incorporated in the BMW Group’s
target liquidity concept. The liquidity position is moni-
tored continuously and managed through Group-wide
planning of financial requirements and funding. A
diversified refinancing strategy reduces dependency
on any specific type of instrument. Moreover, the
BMW Group’s solid financial and earnings position
results in high credit ratings from internationally
recognised rating agencies.
Further information on risks in conjunction with
financial instruments is provided in
note 39 to the
Group Financial Statements.
see
note 39
see
notes 32
Risks and opportunities relating to pension obligations
Pension obligations are influenced in particular by
fluctuations of market yields on corporate bonds, as
well as by other economic and demographic para-
meters. Opportunities and risks arise depending
on changes in these parameters. If risks relating to
pension obligations materialised, they could have a
high earnings impact over the two-year assessment
period. Despite the high level of external funding,
the risk amounts relating to pension obligations are
classified as high. Within a favourable capital market
environment, the return generated by growth-oriented
pension assets may exceed expectations and reduce
the deficit of the relevant pension plans. This could
have a significantly favourable impact on the net asset
position of the BMW Group.
Future pension payments are discounted on the basis
of market yields on high-quality corporate bonds.
These yields are subject to market fluctuation and
therefore influence the level of pension obligations.
Changes in other parameters, such as rises in infla-
tion and longer life expectancy, also impact pension
obligations and payments. Regulatory requirements
can influence the amount of pension obligations.
The BMW Group’s pension obligations are mainly
held in external pension funds or trust arrangements
and the related assets legally separated from those of
the Group. The amount of funds required to finance
pension payments out of operations in the future is
substantially reduced by the fact that the Group’s
pension obligations are mainly settled out of pension
fund assets. The pension assets of the BMW Group
comprise interest-bearing securities, equities, real
estate and other investment classes. Assets held by
pension funds and trust arrangements are monitored
continuously and managed on a risk-and-return basis.
Diversification of investments also helps to mitigate
risk. In order to reduce fluctuations in pension fund-
ing shortfalls, investments are structured to match
the timing of pension payments and the expected
development of pension obligations. Remeasurements
on the liability and fund asset sides are recognised
net of deferred taxes in other comprehensive income
and hence directly in equity (within revenue reserves).
Further information on risks in conjunction with pen-
sion provisions is provided in
note 32 to the Group
Financial Statements.
Risks and opportunities relating to the Financial
Services segment
The categories of risk relating to financial services
comprise credit and counterparty risk, residual value
risk, interest rate risk, operational risks and liquidity
risk. Evaluation of liquidity risk for the Financial Services
segment is included in the liquidity risk category for
the Group as a whole. The segment’s total risk expo-
sure was covered at all times during the 2018 financial
year by the available risk-covering assets. As a result,
the Financial Services segment’s risk-bearing capacity
was assured at all times.
Credit and counterparty risks and opportunities
relating to the Financial Services segment
Credit and counterparty default risk arises within the
Financial Services segment if a contractual partner
(e. g. a customer or dealer) either becomes unable or
only partially able to fulfil its contractual obligations,
so that lower income is generated or losses incurred.
If credit and counterparty risks were to materialise,
they could have a medium earnings impact over the
two-year assessment period. The risk amount is clas-
sified as medium. The BMW Group classifies potential
opportunities in this area as significant.
Combined Management Report 101
premium segment responded here with price declines
for diesel vehicles. As part of the management of resid-
ual value risks, the net present value of risk costs is
calculated at contract inception. Market developments
are observed throughout the contractual period and
the risk assessment updated.
Interest rate risks and opportunities relating
to the Financial Services segment
Interest rate risks in the Financial Services segment
relate to potential losses caused by changes in market
interest rates. These can arise when fixed interest rate
periods do not match for assets and liabilities recog-
nised in the balance sheet. If interest rate risks were
to materialise, they could have a medium earnings
impact over the two-year assessment period. The risk
amount is classified as medium. The BMW Group
classifies potential interest rate opportunities com-
pared to the outlook as significant. Interest rate risks
in the Financial Services business are managed by
matching maturities for refinancing and by employing
interest-rate derivatives. If the relevant recognition cri-
teria are fulfilled, derivatives used by the BMW Group
are accounted for as hedging instruments. Further
information on risks in conjunction with financial
instruments is provided in
note 39 to the Group
Financial Statements.
Operational risks in the Financial
Services segment
Operational risks are defined in the Financial Services
segment as the risk of losses arising as a consequence
of unsuitability or failure of internal procedures
(process risks), people (personnel-related risks), sys-
tems (infrastructure and IT risks) and external events
(external risks). The recording and measurement of
risk scenarios, loss events and countermeasures in
the operational risk management system provide the
basis for a systematic analysis and management of
potential or materialised operational risks. Annual
self-assessments are also carried out. If operational
risks were to materialise, they would be likely to have
a low earnings impact over the two-year assessment
period. The risk amount is classified as medium.
see
notes 39
Initial and continuous creditworthiness testing is
an important aspect of the BMW Group’s credit
risk management. For this reason, every borrower’s
creditworthiness is tested for all credit financing
and lease contracts entered into by the BMW Group.
Opportunities can arise when the managed portfolio
presents itself over time better than as was estimated
at the provision of the credit. An intense management
of the purchase process and the securities evaluation
as well as the development of macroeconomic factors
can strengthen the opportunities. In the case of retail
customer financing, creditworthiness is assessed
using validated scoring systems integrated into the
purchasing process. In the area of dealership financing,
creditworthiness is assessed by means of ongoing
credit monitoring and an internal rating system that
takes account not only of the material credit standing
of the borrower, but also of qualitative factors such
as past reliability in business relations. Changes in
the creditworthiness of customers arising during the
credit term are covered by risk provisioning proce-
dures. The credit risk of the individual customers is
quantified on a monthly basis and, depending on
the outcome, taken into account within the risk pro-
visioning system. Macroeconomic developments are
currently subject to a higher degree of volatility. If
developments are more favourable than assumed in
the outlook, credit losses may be reduced, leading to
a positive earnings impact.
Residual value risks and opportunities relating
to the Financial Services segment
Risks and opportunities arise in conjunction with
leasing contracts if the market value of a leased vehicle
at the end of the contractual term of a lease differs
from the residual value estimated at the inception
of the lease and factored into the lease payments. A
residual value risk exists if the expected market value
of the vehicle at the end of the contractual term is
lower than its estimated residual value at the date
the contract is entered into. If residual value risks
were to materialise, they could have a high earnings
impact from the Group’s perspective over the two-year
assessment period. A high earnings impact would
then arise for the affected Financial Services and
Automotive segments. The risk amount is classified
as high for the Group as a whole. Opportunities can
arise out of a positive deviation from the original
residual value forecast. The BMW Group classifies
potential residual value opportunities as significant.
Each vehicle’s estimated residual value is calculated
on the basis of historical external and internal data.
This estimation provides the expected market value
of the vehicle at the end of the contractual period.
Developments on pre-owned car markets represent
an important factor. In 2018, diesel engines were
again the subject matter of political discussions in
the European region. Pre-owned car markets in the
102
Report on Outlook,
Risks and
Opportunities
Risks and
Opportunities
Internal Control
System Relevant for
Accounting and
Financial Reporting
Process
Legal risks
The BMW Group is exposed to various legal risks, not
least as a result of its global operations. Legal risks may
result from non-compliance with laws or other legal
requirements or from legal disputes with business
partners or other market participants. If legal risks
were to materialise, they could have a high earnings
impact over the two-year assessment period. The risk
amount attached to significant identified legal risks
is classified as medium. However, it cannot be ruled
out that new legal risks, as yet unforeseen, could
materialise that could have a high earnings impact
for the BMW Group.
The increasing globalisation of the BMW Group’s
operations and of business interdependencies in
general, combined with the variety and complexity
of legal provisions, including, increasingly, import
and export regulations, give rise to an increased risk
of non-compliance with applicable law. A Compliance
Management System is in place at BMW Group to
ensure that the representative bodies, managers
and staff across the globe consistently act in a lawful
manner. Further information on the BMW Group’s
Compliance Management System can be found in the
section Corporate Governance.
Like all entities with international operations, the
BMW Group is confronted with legal disputes, claims
particularly relating to warranties and product liability
or rights infringements and proceedings initiated by
government agencies. Any of these could, amongst
other consequences, have an adverse impact on the
Group’s reputation. Such proceedings are typical
for the sector and may result as a consequence of
realigning product or purchasing strategies to changed
market conditions. Particularly in the US market,
class action lawsuits and product liability risks can
have substantial financial consequences and cause
damage to the Group’s public image. More rigorous
application or interpretation of existing consumer
protection regulations could result in a greater number
of recalls. The high quality of the Group’s products,
which is ensured by regular quality audits and ongoing
improvement measures, helps reduce this risk.
The BMW Group recognises appropriate levels of
provision for lawsuits. In addition, a part of these
risks is insured where this makes business sense.
Such items are reported as contingent liabilities. It
cannot be ruled out, however, that damages could
arise that are either not covered or not fully covered
by insurance policies or provisions or reported as
contingent liabilities. In accordance with IAS 37
(Provisions, Contingent Liabilities and Contingent
Assets), the required information is not provided
if the BMW Group concludes that disclosure of the
information could seriously prejudice the outcome of
the relevant legal proceedings. Further information
on contingent liabilities is provided in
note 38 to
the Group Financial Statements.
see
notes 38
Overall assessment of the risk and opportunities
situation
The overall risk assessment is based on a consolidated
view of all significant individual risks and opportu-
nities. The overall risk level for the BMW Group as a
whole has increased slightly compared to the previous
year, while there has been no significant change in
the opportunity situation. Exposure to risks in the
individual risk categories remains essentially stable.
In addition to the risk categories described above,
unforeseen events could have a negative impact on
business operations and hence on the BMW Group’s
results of operations, financial position and net assets
as well as on its reputation. A comprehensive risk
management system is in place to ensure that the
BMW Group successfully manages these risks.
From today’s perspective, management does not see
any threat to the BMW Group’s status as a going
concern. As in the previous year, identified risks are
considered to be manageable, but could – like the
opportunities – have an impact on the underlying key
performance indicators, which could then, as a result,
deviate from the outlook if they were to materialise.
The BMW Group’s financial position is stable and cash
needs are currently covered by available liquidity and
credit lines.
Possible risks for the BMW Group related to competi-
tion and antitrust law cannot in detail be predicted or
quantified at present. Further information on current
developments with regard to identified antitrust risks
and contingent liabilities can be found in
note 38
to the Group Financial Statements.
see
note 38
Combined Management Report 103
INTERNAL CONTROL
SYSTEM* RELEVANT FOR
ACCOUNTING AND
FINANCIAL REPORTING
PROCESSES
* Disclosures
pursuant to
§ 289 (5)
and § 315 (2)
no. 5 HGB.
The internal control system relevant for accounting
and financial reporting processes has the task of
ensuring that accounting and financial reporting by
the BMW Group is both correct and reliable. Inter-
nationally recognised standards for internal control
systems have been taken into account in the design of
the components of the BMW Group’s internal control
system. The system comprises:
— Group-wide mandatory accounting guidelines,
— controls integrated into processes and
IT systems,
— organisational measures incorporating the
principle of separation of duties, and
— process-independent monitoring measures.
The internal control system is subject to continuous
improvement, with system effectiveness assessed
regularly on the basis of centralised and decentralised
process analyses, analyses of data within the various
financial systems and audit procedures. The principal
features of the internal control system, as far as they
relate to individual entity and Group accounting and
financial reporting processes, are described below.
Guidelines for recognising, measuring and allocating
items to accounts are available to all employees via
the intranet. New accounting standards are assessed
for their impact on the BMW Group’s accounting
and financial reporting. Accounting guidelines and
processes are reviewed continuously and revised at
least once a year or more frequently, if necessary.
Controls are integrated into the accounting and finan-
cial reporting processes, at both individual entity and
Group level. These are both preventive and detective
in nature and take account, where appropriate, of
the principle of the separation of duties. Important
accounting-related IT systems incorporate controls
which, amongst others, prevent business transactions
from being recorded incorrectly and ensure that
business transactions are recorded completely and in
good time and measured properly in accordance with
applicable requirements. Controls are also in place to
test the appropriateness of consolidation procedures.
The recording of items requiring disclosure is also
performed largely through IT systems.
As part of the ongoing development of accounting and
financial reporting processes at individual entity or
Group level, such controls are adapted to take account
of new requirements and opportunities arising with
advances in information technology. In addition, the
BMW Group uses data analysis tools to ensure that
any control weaknesses are quickly identified and
eliminated.
Responsibilities for ensuring the effectiveness of
the internal control system in relation to individual
entity and Group accounting and financial reporting
processes are clearly defined and allocated to the
relevant line and process managers. These report
annually on their assessment of the effectiveness of the
internal control system for accounting and financial
reporting to the Board of Management. The assessment
also includes the results of internal and external audits
as well as of ongoing data analysis. In this context,
the Groupʼs units confirm the effectiveness of the
internal control system for accounting and financial
reporting. The results of the assessment are gathered
and documented with the aid of tools. Weaknesses in
the control system are eliminated, taking into account
their potential impact on accounting processes. The
Board of Management and Audit Committee are
briefed annually on the assessment of the effective-
ness of the internal control system for accounting and
financial reporting. The Board of Management and,
where applicable, the Supervisory Board are informed
immediately in the event of any significant changes
in the effectiveness of the internal control system.
104
Disclosures Relevant
for Takeovers
and Explanatory
Comments
DISCLOSURES RELEVANT
FOR TAKEOVERS* AND
EXPLANATORY COMMENTS
* Disclosures
pursuant to
§ 289 (5) and
§ 315 (2) No. 5
HGB.
Composition of subscribed capital
The subscribed capital (share capital) of BMW AG
amounted to € 658,122,100 at 31 December 2018
(2017: € 657,600,600) and, in accordance with Article 4
no. 1 of the Articles of Incorporation, is subdivided
into 601,995,196 shares of common stock (91.47 %)
(2017: 601,995,196; 91.54 %) and 56,126,904 shares of
non-voting preferred stock (8.53 %) (2017: 55,605,404;
8.46 %), each with a par value of € 1. The Company’s
shares are issued to bearer.
The rights and duties of shareholders derive from the
German Stock Corporation Act (AktG) in conjunction
with the Company’s Articles of Incorporation, the
www.bmwgroup.com. The
full text of which is available at
right of shareholders to have their shares evidenced
is excluded in accordance with the Articles of Incor-
poration. The voting power attached to each share
corresponds to its par value. Each € 1 of par value
of share capital represented in a vote entitles the
holder to one vote (Article 18 no. 1 of the Articles of
Incorporation).
The Company’s shares of preferred stock are shares
within the meaning of § 139 ff. AktG, which carry a
cumulative preferential right in terms of the allocation
of profit and for which voting rights are excluded.
These shares confer voting rights only in exceptional
cases stipulated by law, in particular when the prefer-
ence amount has not been paid or has not been fully
paid in one year and the arrears are not paid in the
subsequent year alongside the full preference amount
due for that year. With the exception of voting rights,
holders of shares of preferred stock are entitled to
the same rights as holders of shares of common stock.
Article 24 of the Articles of Incorporation confers
preferential treatment to the non-voting shares of
preferred stock with regard to the appropriation of the
Company’s unappropriated profit. Accordingly, the
unappropriated profit is required to be appropriated
in the following order:
(a) subsequent payment of any arrears on dividends
on non-voting preferred shares in the order of
accruement
(b) payment of an additional dividend of € 0.02 per
€ 1 par value on non-voting preferred shares
(c) uniform payment of any other dividends on
shares of common and preferred stock, provided
the shareholders do not resolve otherwise at
the Annual General Meeting
Restrictions on voting rights or the transfer
of shares
As well as shares of common stock, the Company
has also issued non-voting shares of preferred stock.
Further information can be found in the section
“Composition of subscribed capital”.
When the Company issues non-voting shares of
preferred stock to employees in conjunction with its
Employee Share Programme, these shares are gener-
ally subject to a company-imposed blocking period
of four years, calculated from the beginning of the
calendar year in which the shares are issued.
Contractual holding period arrangements also apply to
shares of common stock acquired by Board of Manage-
ment members and certain senior department heads
in conjunction with the share-based remuneration
programmes (Compensation Report of the Corporate
Governance section;
note 41 of the Group Financial
Statements).
see
note 41
Combined Management Report Direct or indirect investments in capital exceeding
10 % of voting rights
Based on the information available to the Company,
the following direct or indirect holdings exceeding
10 % of the voting rights at the end of the reporting
period were held at the stated reporting date: 1
105
in %
Stefan Quandt, Germany
AQTON SE, Bad Homburg v. d. Höhe, Germany
AQTON Verwaltung GmbH, Bad Homburg v. d. Höhe, Germany
AQTON GmbH & Co. KG für Automobilwerte, Bad Homburg v. d. Höhe, Germany
Susanne Klatten, Germany
Susanne Klatten Beteiligungs GmbH, Bad Homburg v. d. Höhe, Germany
1 Based on voluntary notifications provided by the listed shareholders as at 31 December 2018.
2 Controlled entities, of which 3 % or more are attributed: AQTON SE, AQTON Verwaltung GmbH, AQTON GmbH & Co. KG für Automobilwerte.
3 Controlled entities, of which 3 % or more are attributed: AQTON Verwaltung GmbH, AQTON GmbH & Co. KG für Automobilwerte.
4 Controlled entities, of which 3 % or more are attributed: AQTON GmbH & Co. KG für Automobilwerte.
5 Controlled entities, of which 3 % or more are attributed: Susanne Klatten Beteiligungs GmbH.
Direct share of
voting rights
Indirect share of
voting rights
0.2
9.0
16.6
0.2
20.7
25.6 2
16.6 3
16.6 4
20.75
The voting percentages disclosed above may have
changed subsequent to the stated date if these changes
were not required to be reported to the Company.
As the Company’s shares are issued to bearer, the
Company is generally aware of changes in sharehold-
ings only if such changes are subject to mandatory
notification rules.
Shares with special rights which confer control
rights
There are no shares with special rights which confer
control rights.
Control of voting rights when employees
participate in capital and do not exercise their
control rights directly
Like all other shareholders, employees exercise their
control rights pertaining to shares they have acquired
in conjunction with the Employee Share Programme
and / or the share-based remuneration programme
directly on the basis of relevant legal provisions and
the Company’s Articles of Incorporation.
Statutory regulations and Articles of Incorporation
provisions with regard to the appointment and
removal of members of the Board of Management
and changes to the Articles of Incorporation
The appointment or removal of members of the Board
of Management is based on the rules contained in
§ 84 f. AktG in conjunction with § 31 of the German
Co-Determination Act (MitbestG).
Amendments to the Articles of Incorporation must
comply with § 179 ff. AktG. Amendments must be
decided upon by the shareholders at the Annual
General Meeting (§ 119 (1) no. 5, § 179 (1) AktG). The
Supervisory Board is authorised to approve amend-
ments to the Articles of Incorporation which only affect
its wording (Article 14 no. 3 of the Articles of Incorpo-
ration). Resolutions are passed at the Annual General
Meeting by simple majority of shares exercised unless
otherwise explicitly required by binding provisions of
law or, when a majority of share capital is required,
by simple majority of shares represented in the vote
(Article 20 no. 1 of the Articles of Incorporation).
106
Disclosures Relevant
for Takeovers
and Explanatory
Comments
Authorisations of the Board of Management in
particular with respect to the issuing or buying
back of shares
The Board of Management is authorised to buy back
shares and sell repurchased shares in situations speci-
fied in § 71 AktG, for example to avert serious and
imminent damage to the Company and / or to offer
shares to persons employed or previously employed
by BMW AG or one of its affiliated companies.
In accordance with the resolution passed at the
Annual General Meeting on 15 May 2014, the Board of
Management is also authorised up until 14 May 2019
to acquire shares of non-voting preferred stock of the
Company via the stock exchange, up to a maximum
of 1 % of the share capital existing at the date of the
resolution. The consideration paid by the Company
per share of non-voting preferred stock (excluding
transaction costs) may not be more than 10 % above
or below the market price of the stock determined
by the opening auction on the date of trading in the
Xetra trading system (or a successor system having a
comparable function). Moreover, the Board of Man-
agement is authorised to use the acquired own shares
of non-voting preferred stock for all legally admissible
purposes, specifically including the right to offer for
sale and transfer shares to persons employed by the
Company or one of its affiliated companies up to a
proportionate amount of € 5 million of share capital.
The subscription rights of existing shareholders to the
new shares of preferred stock used for the purpose
stated above are excluded. The authorisations may
also be exercised in parts over several transactions.
In accordance with Article 4 no. 5 of the Articles of
Incorporation, the Board of Management is authorised,
with the approval of the Supervisory Board, to increase
for cash contributions BMW AG’s share capital during
the period until 14 May 2019 by up to € 3,132,883 for
the purposes of an Employee Share Programme by
issuing new non-voting shares of preferred stock,
which carry the same rights as existing non-voting
preferred stock (Authorised Capital 2014). Subscrip-
tion rights of existing shareholders are excluded. No
conditional capital is in place at the reporting date.
Significant agreements of the Company taking
effect in the event of change in control following a
takeover bid
BMW AG is party to the following major agreements,
which contain provisions that would apply in the event
of a change in control or the acquisition of control as a
result of a takeover bid:
— An agreement concluded with an international
consortium of banks relating to a syndicated
credit line, which was not being utilised at the
balance sheet date, entitles the lending banks
to give extraordinary notice to terminate the credit
line, such that all outstanding amounts, including
interest, would fall due immediately if one or more
parties jointly acquire direct or indirect control
of BMW AG. The term control is defined as the
acquisition of more than 50 % of the share capital
of BMW AG, or the right to receive more than 50 %
of the dividend or the right to direct the affairs
of the Company or appoint the majority of the
members of the Supervisory Board.
— A cooperation agreement concluded with
Peugeot SA relating to small (1- to 1.6-litre)
petrol engines entitles each of the cooperation
partners to give extraordinary notification of
termination in the event of a competitor acquiring
control over the other contractual party and if
any concerns of the other contractual party re-
gard ing the impact of the change of control on
the cooperation arrangements are not resolved
during the subsequent discussion process.
— BMW AG acts as guarantor for all obligations aris-
ing from the joint venture agreement relating
to BMW Brilliance Automotive Ltd. in China. This
agreement grants an extraordinary right of termi-
nation to either joint venture partner in the event
that – either directly or indirectly – more than 25 %
of the shares of the other party are acquired by a
third party, or if the other party is merged with
another legal entity. The termination of the joint
venture agreement may result in the sale of the
shares to the other joint venture partner or in the
liquidation of the joint venture entity.
— Framework agreements are in place with financial
institutions and banks (ISDA Master Agreements)
relating to trading activities with derivative finan-
cial instruments. These agreements include an
extraordinary right of termination which triggers
actions in the event that the creditworthiness of
the party involved is significantly weaker following
a direct or indirect acquisition of beneficially
owned equity capital that confers the power to elect
a majority of the Supervisory Board of a contrac-
tual party or any other ownership interest that
Combined Management Report enables the acquirer to exercise control over a
contractual party, or which constitutes a merger
or a transfer of net assets.
— Financing agreements in place with the European
Investment Bank (EIB) entitle the EIB to request
early repayment of the loan in the event of an
imminent or actual change in control of BMW AG,
if the EIB has reason to assume – after the change
in control or 30 days after it has made a request
to discuss the situation – that the change in control
could have a significantly adverse impact, or if
the borrower refuses to hold any such discussions.
A change in control of BMW AG arises if one
or more individuals take over or lose control of
BMW AG, with control being defined in the
above-mentioned financing agreements as
(i) holding or having control over more than 50 %
of the voting rights, (ii) the right to appoint the
majority of the members of the Board of Man-
agement or Supervisory Board, (iii) the right to
receive more than 50 % of dividends payable
or (iv) any other comparable controlling influence
over BMW AG.
— On the basis of a Business Combination Agree-
ment concluded on 28 March 2018, BMW AG
and Daimler AG have established five operating
joint ventures in the areas of car sharing, ride
hailing, parking, charging and multimodality, into
which BMW has contributed a number of busi-
nesses, including DriveNow, Parkmobile, Digital
Charging Solutions and ReachNow. The Frame-
work Joint Venture Agreement entitles Daimler AG
and BMW AG (principals) each to initiate a bid-
ding process in the event that (i) a shareholder
or third party notifies the other principal
pursuant to § 33 WpHG that voting rights, in clud-
ing those attributed pursuant to § 34 WpHG,
have reached the threshold of 50 % or pursuant
to § 20 AktG that a shareholding of more than
50 % exists, or (ii) a shareholder or a third party
holds more than 50 % of the voting rights or
shares in the other principal, including those at-
tributed pursuant to § 30 WpHG (iii) a share-
holder or third party entered into a domination
agreement with the other principal, who is the
dominated entity. Such a bidding process is re-
quired to be carried out for each of the above-
mentioned business divisions as well as for the
special- purpose entity holding the relevant
trademark rights, whereby the highest bidding
principal for the respective business division
or special-purpose entity wins the relevant bid.
107
— Several supply and development contracts between
BMW AG and various industrial customers, all
relating to the sale of components for drivetrain
systems, grant an extraordinary right of ter-
mination to the relevant industrial customer in
specified cases of a change in control at BMW AG
(for example BMW AG merges with a third party
or is taken over by a third party; an automobile
manufacturer acquires more than 50 % of the voting
rights or share capital of BMW AG).
— BMW AG is party to the shareholder agreement
relating to There Holding B. V., which is the
majority shareholder of the HERE Group. In
accordance with the shareholder agreement,
each contractual party is required to offer its
directly or indirectly held shares in There
Holding B. V. for sale to the other shareholders
in the event of a change in control. A change
in control of BMW AG arises if a person takes
over or loses control of BMW AG, with control
defined as (i) holding or having control over
more than 50 % of the voting rights, (ii) the
possibility to control more than 50 % of voting
rights exercisable at Annual General Meetings
on all or nearly all matters, or (iii) the right to
determine the majority of members of the
Board of Management or the Supervisory Board.
Furthermore, a change in control occurs if
competitors of the HERE Group or certain potential
competitors of the HERE Group from the tech-
nology sector acquire at least 25 % of BMW AG.
If none of the other shareholders acquire these
shares, the other shareholders are entitled to
resolve that There Holding B. V. be dissolved.
— The development collaboration agreement between
BMW AG, Intel Corporation and Mobileye Vision
Technologies Ltd., relating to the development of
technologies used in highly and fully automated
vehicles, may be terminated by any of the con-
tractual parties if a competitor of one of the
parties acquires and subsequently holds at least
30 % of the voting shares of one of the contrac-
tual parties.
— The development collaboration agreement between
BMW AG, FCA US LLC and FCA Italy S. p. A.,
relating to the development of technologies used
in automated vehicles, may be terminated by
any of the contractual parties if certain competi-
tors in the technology sector acquire and sub-
sequently hold at least 30 % of the voting shares
of the other contractual party.
108
Disclosures Relevant
for Takeovers
and Explanatory
Comments
— BMW AG has agreed with Great Wall Motor
Company Limited to establish the joint venture
Spotlight Automotive Ltd. in China. The
agreement grants an extraordinary right of
termination to either joint venture partner
in the event that – either directly or indirectly –
more than 25 % of the shares of the other
party are acquired by a third party or the other
party is merged with another legal entity.
The termination of the joint venture agreement
may result in the sale of the shares to the
other joint venture partner or in the liquidation
of the joint venture entity.
Compensation agreements with members of the
Board of Management or with employees in the
event of a takeover bid
The BMW Group has not concluded any compensation
agreements with members of the Board of Manage-
ment or with employees for situations involving a
takeover offer.
Fuel consumption and CO2 emissions information
• 66
Model
BmW
BMW M2 Competition
BMW M3
BMW M3 CS
BMW M5 / Competition
BMW X3 M40i
mini
MINI Cooper SE Countryman ALL4
rolls-royce
Cullinan
Phantom
BmW electriFied models
BMW i3 (120 Ah) with pure electric drive BMW eDrive
BMW i3s (120 Ah) with pure electric drive BMW eDrive
BMW i8 Coupé
BMW i8 Roadster
Fuel consumption
in l / 100 km
(combined)
CO2 emissions
in g / km
(combined)
Electric power
consumption
in kWh / 100 km
( combined)
10.0 – 9.8
227 – 224
9.1
8.5
10.8 – 10.7
9.1
209
198
246 – 243
207 – 206
–
–
–
–
–
2.5 – 2.4
56 – 55
13.7 – 13.2
15
341
14.5 – 14.4
330 – 328
–
–
–
–
1.8
2.0
0
0
42
46
13.1
14.6 – 14.0
14.0
14.5
Combined Management Report GROUP FINANCIAL
STATEMENTS
Page 110 Income Statement
Page 110 Statement of Comprehensive Income
Page 112 Balance Sheet
Page 114 Cash Flow Statement
Page 116 Statement of Changes in Equity
Page 118 Notes to the Group Financial Statements
Page 118 Accounting Principles and Policies
Page 139 Notes to the Income Statement
Page 145 Notes to the Statement of Comprehensive Income
Page 146 Notes to the Balance Sheet
Page 167 Other Disclosures
Page 184 Segment Information
Page 190 List of Investments at 31 December 2018
3
3
Group Financial
Statements
Income Statement
Statement of
Comprehensive
Income
Balance Sheet
Cash Flow
Statement
Notes
110
BMW Group
Income Statement
Statement of Com-
prehensive Income
BMW GROUP
INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
Income Statements for Group and Segments
• 67
in € million
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Other operating expenses
Profit / loss before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit / loss before tax
Income taxes
Profit / loss from continuing operations
Loss from discontinued operations
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
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 €
Group
Automotive
(unaudited supplementary
information)
Motorcycles
(unaudited supplementary
information)
Financial Services
Other Entities
(unaudited supplementary
(unaudited supplementary
(unaudited supplementary
information)
information)
Eliminations
information)
Note
2018
2017*
2018
2017*
2018
2017*
2018
2017
2018
2017
2018
2017*
8
9
10
11
11
24
12
12
13
14
31
15
15
15
15
97,480
98,282
85,846
85,742
– 78,924
– 78,329
– 71,918
– 69,402
13,928
– 7,880
810
– 676
6,182
632
567
– 533
129
795
6,977
– 1,853
5,124
– 33
5,091
30
5,061
16,340
– 7,927
675
– 1,200
7,888
739
325
– 530
295
829
8,717
– 3,418
5,299
–
5,299
22
5,277
18,556
– 9,558
774
– 651
9,121
632
397
– 386
51
694
9,815
– 2,575
7,240
– 33
7,207
90
7,117
10.82
10.84
–
10.82
10.84
19,953
– 9,560
720
– 1,214
9,899
739
201
– 412
248
776
10,675
– 2,000
8,675
–
8,675
86
8,589
13.07
13.09
–
13.07
13.09
2,173
– 1,738
435
– 263
2,272
– 1,798
474
– 256
4
– 1
175
–
–
– 6
–
– 6
169
– 45
124
–
124
–
124
4
– 15
207
–
–
– 2
–
– 2
205
– 63
142
–
142
–
142
28,165
27,567
– 24,541
– 23,986
– 18,710
– 17,306
3,624
– 1,352
42
– 124
2,190
–
12
– 14
– 27
– 29
2,161
– 508
1,653
–
1,653
60
1,593
3,581
– 1,370
96
– 113
2,194
–
12
– 10
11
13
2,207
1,840
4,047
4,047
–
64
3,983
1,178
– 1,145
6
–
6
– 79
126
– 80
– 27
–
– 51
– 18
– 45
– 36
– 81
– 81
–
–
– 81
7
–
7
– 27
130
– 96
14
–
1,110
– 986
– 58
66
80
– 19
61
61
–
–
61
19,273
563
16
– 208
230
601
– 1,360
1,312
–
–
– 48
553
– 133
420
420
–
–
420
16,857
– 449
20
– 185
210
– 404
– 1,246
1,116
–
–
–
–
– 130
– 534
– 340
– 874
– 874
– 874
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Other operating expenses
Profit / loss before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit / loss before tax
Income taxes
Profit / loss from continuing operations
Loss from discontinued operations
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
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 €
Statement of Comprehensive Income for Group
• 68
in € million
Net profit
Remeasurement of the net defined benefit liability for pension plans
Deferred taxes
Items not expected to be reclassified to the income statement in the future
Marketable securities (at fair value through other comprehensive income)
Financial instruments used for hedging purposes
Costs of hedging
Other comprehensive income from equity accounted investments
Deferred taxes
Currency translation foreign operations
Items that can be reclassified to the income statement in the future
Other comprehensive income for the period after tax
Total comprehensive income
Total comprehensive income attributable to minority interests
Total comprehensive income attributable to shareholders of BMW AG
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
Note
2018
2017*
7,207
935
– 217
718
– 30
– 1,381
– 620
– 157
674
192
– 1,322
– 604
6,603
90
6,513
32
19
31
8,675
693
– 218
475
39
1,914
–
– 30
– 597
– 1,171
155
630
9,305
86
9,219
Group Financial Statements
111
Group
(unaudited supplementary
(unaudited supplementary
Automotive
information)
Motorcycles
information)
Financial Services
(unaudited supplementary
information)
Other Entities
(unaudited supplementary
information)
Eliminations
(unaudited supplementary
information)
Note
2018
2017*
2018
2017*
2018
2017*
2018
2017
2018
2017
2018
2017*
97,480
98,282
85,846
85,742
– 78,924
– 78,329
– 71,918
– 69,402
28,165
27,567
– 24,541
– 23,986
3,624
– 1,352
42
– 124
2,190
–
12
– 14
– 27
– 29
2,161
– 508
1,653
–
1,653
60
1,593
3,581
– 1,370
96
– 113
2,194
–
12
– 10
11
13
2,207
1,840
4,047
–
4,047
64
3,983
6
–
6
– 79
126
– 80
– 27
–
1,178
– 1,145
– 51
– 18
– 45
– 36
– 81
–
– 81
–
– 81
7
–
7
– 27
130
– 96
14
–
1,110
– 986
– 58
66
80
– 19
61
–
61
–
61
– 18,710
– 17,306
19,273
563
16
– 208
230
601
–
– 1,360
1,312
–
– 48
553
– 133
420
–
420
–
420
16,857
– 449
20
– 185
210
– 404
–
– 1,246
1,116
–
– 130
– 534
– 340
– 874
–
– 874
–
– 874
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Other operating expenses
Profit / loss before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit / loss before tax
Income taxes
Profit / loss from continuing operations
Loss from discontinued operations
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
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 €
Income Statements for Group and Segments
• 67
in € million
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Other operating expenses
Profit / loss before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit / loss before tax
Income taxes
Profit / loss from continuing operations
Loss from discontinued operations
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
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 €
13,928
– 7,880
810
– 676
6,182
632
567
– 533
129
795
6,977
– 1,853
5,124
– 33
5,091
30
5,061
16,340
– 7,927
675
– 1,200
7,888
739
325
– 530
295
829
8,717
– 3,418
5,299
5,299
–
22
5,277
2,173
– 1,738
435
– 263
2,272
– 1,798
474
– 256
4
– 1
175
–
–
–
– 6
– 6
169
– 45
124
124
–
–
124
4
–
–
–
– 15
207
– 2
– 2
205
– 63
142
142
–
–
142
8
9
10
11
11
24
12
12
13
14
31
15
15
15
15
18,556
– 9,558
9,815
– 2,575
774
– 651
9,121
632
397
– 386
51
694
7,240
– 33
7,207
90
7,117
10.82
10.84
–
10.82
10.84
19,953
– 9,560
720
– 1,214
9,899
739
201
– 412
248
776
10,675
– 2,000
8,675
8,675
–
86
8,589
13.07
13.09
–
13.07
13.09
Statement of Comprehensive Income for Group
• 68
in € million
Net profit
Deferred taxes
Costs of hedging
Deferred taxes
Remeasurement of the net defined benefit liability for pension plans
Items not expected to be reclassified to the income statement in the future
Marketable securities (at fair value through other comprehensive income)
Financial instruments used for hedging purposes
Other comprehensive income from equity accounted investments
Currency translation foreign operations
Items that can be reclassified to the income statement in the future
Other comprehensive income for the period after tax
Total comprehensive income
Total comprehensive income attributable to minority interests
Total comprehensive income attributable to shareholders of BMW AG
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
Note
2018
2017*
7,207
935
– 217
718
– 30
– 1,381
– 620
– 157
674
192
– 1,322
– 604
6,603
90
6,513
32
19
31
8,675
693
– 218
475
39
1,914
–
– 30
– 597
– 1,171
155
630
9,305
86
9,219
112
BMW Group
Balance Sheet
at 31 December 2018
BMW GROUP
BALANCE SHEET AT 31 DECEMBER 2018
in € million
Note
2018
1. 1. 2018 1
31. 12. 20172
2018
20172
2018
20172
2018
2017
2018
2017
2018
20172
Group
Automotive
(unaudited supplementary
information)
Motorcycles
(unaudited supplementary
information)
Financial Services
Other Entities
(unaudited supplementary
(unaudited supplementary
(unaudited supplementary
information)
information)
Eliminations
information)
10,971
19,801
38,572
2,624
739
48,109
1,010
1,590
2,026
9,464
18,471
36,257
2,769
690
48,475
2,369
1,965
1,630
9,464
18,471
36,257
2,769
690
48,321
2,369
1,993
1,630
10,472
19,372
–
2,624
4,843
–
216
3,043
5,085
8,981
18,050
–
2,769
4,985
–
1,302
2,857
3,671
125,442
122,090
121,964
45,655
42,615
13,047
2,546
38,674
6,675
1,366
9,790
10,979
461
12,707
2,663
32,087
7,949
1,566
7,485
9,039
–
12,707
2,667
32,113
7,965
1,566
7,485
9,039
–
12,462
2,287
–
4,988
618
22,016
8,631
461
12,103
2,354
–
5,578
714
23,124
7,157
–
83,538
73,496
73,542
51,463
51,030
95
399
–
–
–
–
–
–
33
527
568
167
–
–
–
2
12
–
749
57
388
–
–
–
–
–
–
32
477
580
160
–
–
–
5
8
–
753
46,427
44,285
– 7,855
– 8,028
48,109
48,321
403
30
–
1
138
483
3,562
99,153
17
91
38,674
1,325
79
5,484
1,985
–
425
33
–
2
176
442
3,082
96,766
24
152
32,113
1,531
55
5,331
1,856
–
1
–
–
–
–
–
1
–
460
669
351
–
1
–
–
–
–
–
1
–
1,163
797
18
–
6,660
7,160
– 10,765
– 11,457
695
28
33,956
41,340
1,089
130
26,628
35,008
– 39
– 1,964
– 198
– 1,436
– 40,610
– 31,783
– 61,233
– 52,902
– 98
– 307
48,775
45,963
– 66,487
– 66,938
47,655
41,062
50,256
47,942
– 66,585
– 67,245
208,980
195,586
195,506
97,118
93,645
1,276
1,230
146,808
137,828
91,596
82,950
– 127,818
– 120,147
658
2,118
56,121
– 1,338
57,559
658
2,084
50,993
37
658
2,084
50,815
114
53,772
53,671
529
436
436
58,088
54,208
54,107
39,778
39,361
2,330
5,776
1,806
64,772
5,299
79,983
6,078
1,158
38,825
9,669
15,117
62
3,252
5,632
2,166
53,521
5,045
69,616
6,367
1,124
41,097
9,731
13,443
–
3,252
5,632
2,157
53,548
5,045
69,634
6,367
1,124
41,100
9,731
13,443
–
2,089
5,363
1,016
1,017
7,549
2,405
5,175
1,456
832
6,506
17,034
16,374
5,436
933
879
8,360
24,636
62
5,710
874
947
8,516
21,863
–
–
64
70
–
–
506
640
101
–
–
348
187
–
636
–
69
101
–
–
487
657
99
–
–
355
119
–
573
14,919
14,740
20,683
18,102
– 17,292
– 18,096
49
343
4,611
19,170
36,333
60,506
532
208
25,705
950
43,988
–
72
356
4,302
17,819
28,835
51,384
549
233
24,853
849
45,220
–
128
–
22
44,624
1,168
45,942
9
17
11
–
706
–
38
35,095
9
17
11
–
– 3,843
– 39
– 3,639
– 198
198
– 40,257
– 30,981
36,037
– 44,139
– 34,818
12,339
15,607
– 98
– 307
12,595
13,167
– 66,289
– 66,926
71,383
71,704
24,971
28,811
– 66,387
– 67,233
Current provisions and liabilities
Liabilities in conjunction with assets held for sale
Current provisions and liabilities
70,909
71,762
71,765
40,306
37,910
Total equity and liabilities
208,980
195,586
195,506
97,118
93,645
1,276
1,230
146,808
137,828
91,596
82,950
– 127,818
– 120,147
Total equity and liabilities
1 The opening balance sheet figures have been adjusted, based on the first-time application of IFRS 15 and IFRS 9, see notes 6 and 7.
2 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
ASSetS
Intangible assets
Property, plant and equipment
Leased products
Investments accounted for using the equity method
Other investments
Receivables from sales financing
Financial assets
Deferred tax
Other assets
Non-current assets
Inventories
Trade receivables
Receivables from sales financing
Financial assets
Current tax
Other assets
Cash and cash equivalents
Assets held for sale
Current assets
Total assets
equIty A nd lIAbIlItI eS
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Equity attributable to shareholders of BMW AG
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
Non-current provisions and liabilities
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
Liabilities in conjunction with assets held for sale
21
22
23
24
25
26
14
28
29
30
25
26
27
28
2
31
31
31
31
31
32
33
14
35
36
33
34
35
37
36
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
ASSetS
Intangible assets
Property, plant and equipment
Leased products
Investments accounted for using the equity method
Other investments
Receivables from sales financing
Financial assets
Deferred tax
Other assets
Non-current assets
Inventories
Trade receivables
Receivables from sales financing
Financial assets
Current tax
Other assets
Cash and cash equivalents
Assets held for sale
Current assets
Total assets
equIty A nd lIAbIlItI eS
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Equity attributable to shareholders of BMW AG
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
Non-current provisions and liabilities
Group Financial Statements
in € million
Note
2018
1. 1. 2018 1
31. 12. 20172
2018
20172
2018
20172
2018
2017
2018
2017
2018
20172
Group
(unaudited supplementary
(unaudited supplementary
Automotive
information)
Motorcycles
information)
Financial Services
(unaudited supplementary
information)
Other Entities
(unaudited supplementary
information)
Eliminations
(unaudited supplementary
information)
403
30
425
33
46,427
44,285
–
1
–
2
48,109
48,321
138
483
3,562
99,153
17
91
38,674
1,325
79
5,484
1,985
–
176
442
3,082
96,766
24
152
32,113
1,531
55
5,331
1,856
–
1
–
–
–
1
–
–
–
–
–
–
–
– 7,855
– 8,028
–
–
6,660
7,160
– 10,765
– 11,457
–
695
28
33,956
41,340
–
1
–
460
669
–
1,089
130
26,628
35,008
–
1
–
1,163
797
–
– 39
– 1,964
–
– 198
– 1,436
– 40,610
– 31,783
– 61,233
– 52,902
–
–
–
– 98
–
–
–
–
– 307
–
48,775
45,963
– 66,487
– 66,938
351
–
18
–
–
–
–
–
Total assets
208,980
195,586
195,506
97,118
93,645
1,276
1,230
146,808
137,828
91,596
82,950
– 127,818
– 120,147
83,538
73,496
73,542
51,463
51,030
749
753
47,655
41,062
50,256
47,942
– 66,585
– 67,245
113
ASSetS
Intangible assets
Property, plant and equipment
Leased products
Investments accounted for using the equity method
Other investments
Receivables from sales financing
Financial assets
Deferred tax
Other assets
Non-current assets
Inventories
Trade receivables
Receivables from sales financing
Financial assets
Current tax
Other assets
Cash and cash equivalents
Assets held for sale
Current assets
Total assets
equIty A nd lIAbIlItI eS
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Equity attributable to shareholders of BMW AG
53,772
53,671
Equity attributable to shareholders of BMW AG
ASSetS
Intangible assets
Property, plant and equipment
Leased products
Investments accounted for using the equity method
Other investments
Receivables from sales financing
Financial assets
Deferred tax
Other assets
Non-current assets
Inventories
Trade receivables
Receivables from sales financing
Financial assets
Current tax
Other assets
Cash and cash equivalents
Assets held for sale
Current assets
equIty A nd lIAbIlItI eS
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
125,442
122,090
121,964
45,655
42,615
21
22
23
24
25
26
14
28
29
30
25
26
27
28
2
31
31
31
31
31
32
33
14
35
36
33
34
35
37
36
2
10,971
19,801
38,572
2,624
739
48,109
1,010
1,590
2,026
13,047
2,546
38,674
6,675
1,366
9,790
10,979
461
658
2,118
56,121
– 1,338
57,559
2,330
5,776
1,806
64,772
5,299
79,983
6,078
1,158
38,825
9,669
15,117
62
9,464
18,471
36,257
2,769
690
48,475
2,369
1,965
1,630
12,707
2,663
32,087
7,949
1,566
7,485
9,039
–
9,464
18,471
36,257
2,769
690
48,321
2,369
1,993
1,630
12,707
2,667
32,113
7,965
1,566
7,485
9,039
–
10,472
19,372
2,624
4,843
–
–
216
3,043
5,085
12,462
2,287
–
4,988
618
22,016
8,631
461
658
2,084
50,993
37
658
2,084
50,815
114
529
436
436
3,252
5,632
2,166
53,521
5,045
69,616
6,367
1,124
41,097
9,731
13,443
–
3,252
5,632
2,157
53,548
5,045
69,634
6,367
1,124
41,100
9,731
13,443
–
2,089
5,363
1,016
1,017
7,549
5,436
933
879
8,360
24,636
62
8,981
18,050
2,769
4,985
–
–
1,302
2,857
3,671
12,103
2,354
5,578
714
23,124
7,157
–
–
2,405
5,175
1,456
832
6,506
5,710
874
947
8,516
21,863
–
Non-current provisions and liabilities
17,034
16,374
Liabilities in conjunction with assets held for sale
1 The opening balance sheet figures have been adjusted, based on the first-time application of IFRS 15 and IFRS 9, see notes 6 and 7.
2 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
95
399
–
–
–
–
–
–
33
527
568
167
–
–
–
2
–
12
–
64
70
–
–
506
640
101
–
–
–
348
187
636
57
388
32
477
580
160
–
–
–
–
–
–
–
–
–
5
8
–
69
101
–
–
–
–
–
–
487
657
99
355
119
573
Current provisions and liabilities
70,909
71,762
71,765
40,306
37,910
71,383
71,704
24,971
28,811
– 66,387
– 67,233
Current provisions and liabilities
Total equity and liabilities
208,980
195,586
195,506
97,118
93,645
1,276
1,230
146,808
137,828
91,596
82,950
– 127,818
– 120,147
Total equity and liabilities
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
Non-current provisions and liabilities
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
49
343
4,611
19,170
36,333
60,506
532
208
25,705
950
43,988
–
72
356
4,302
17,819
28,835
51,384
549
233
24,853
849
45,220
–
706
–
38
35,095
–
–
–
–
– 3,843
– 39
– 3,639
– 198
198
– 40,257
– 30,981
36,037
– 44,139
– 34,818
58,088
54,208
54,107
39,778
39,361
14,919
14,740
20,683
18,102
– 17,292
– 18,096
–
–
–
–
Liabilities in conjunction with assets held for sale
–
–
– 98
–
–
–
– 307
–
128
–
22
44,624
1,168
45,942
9
17
12,339
15,607
11
11
12,595
13,167
– 66,289
– 66,926
9
17
114
BMW Group
Cash Flow Statement
BMW GROUP
CASH FLOW STATEMENT
in € million
Net profit
Loss from discontinued operations
Current tax
Income taxes paid
Interest received 2
Other interest and similar income / expenses 2
Depreciation and amortisation of tangible, intangible and investment assets
Other non-cash income and expense items
Result from equity accounted investments
Gain / loss on disposal of tangible and intangible assets and marketable securities
Change in deferred taxes
Change in leased products
Change in receivables from sales financing
Changes in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Change in provisions
Change in other operating assets and liabilities
Cash inflow / outflow from operating activities
Total investment in intangible assets and property, plant and equipment
Proceeds from subsidies for intangible assets and property, plant and equipment
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investment assets
Acquisitions of subsidiaries and other business units
Proceeds from the disposal of investment assets and other business units
Proceeds from the sale of subsidiaries and other business units
Investments in marketable securities and investment funds
Proceeds from the sale of marketable securities and investment funds
Cash inflow / outflow from investing activities
Payments into equity
Payment of dividend for the previous year
Intragroup financing and equity transactions
Interest paid 2
Proceeds from non-current financial liabilities 3
Repayment of non-current financial liabilities 3
Change in other financial liabilities 4
Cash inflow / outflow from financing activities
Effect of exchange rate on cash and cash equivalents
Effect of changes in composition of Group on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 Interest relating to financial services business is classified as revenues / cost of sales.
3 Proceeds / Repayment of bonds are recognised under Proceeds / Repayment of non-current financial liabilities. Prior year figures adjusted accordingly.
4 The change in commercial paper is recognised under change in other financial liabilities. Prior year figures adjusted accordingly.
5 Includes dividends received from investment assets amounting to € 384 million (2017: € 258 million).
Group
2018
20171
(unaudited supplementary
(unaudited supplementary
Automotive
information)
Financial Services
information)
2018
20171
2018
2017
7,207
33
2,220
– 1,972
170
– 199
5,113
111
– 632
– 34
355
– 1,693
– 5,670
– 573
– 357
112
– 328
– 82
697
5,051
8,675
–
2,558
– 2,301
125
65
4,822
– 249
– 739
– 43
– 559
– 1,134
– 7,440
166
– 1,293
45
1,414
752
1,211
5,909
– 7,777
– 7,112
– 7,618
– 6,972
– 13
– 15
Total investment in intangible assets and property, plant and equipment
21
107
– 164
– 209
623 5
–
– 3,725
3,761
– 7,363
–
30
– 142
–
267
969
– 4,041
3,866
– 6,163
25
38
– 2,630
– 2,324
–
– 136
30,762
–
– 165
23,955
– 22,564
– 16,801
– 1,161
4,296
– 19
– 25
– 3,131
1,572
– 223
64
1,940
1,159
9,039
10,979
7,880
9,039
– 1,259
– 6,790
– 6,384
5,091
33
1,886
– 1,751
170
– 165
4,982
83
– 632
– 35
– 71
–
–
– 758
– 390
59
– 427
344
175
9,352
18
105
– 145
– 209
1,210
–
– 3,692
3,562
– 6,769
2,099
– 136
1
– 410
– 2
– 31
– 25
5,299
–
2,699
– 1,896
125
89
4,699
25
– 739
– 41
909
–
–
78
43
– 1,179
1,214
1,069
– 1,468
10,848
–
28
– 482
1,037
–
–
– 3,810
3,655
– 6,544
567
– 165
–
– 48
73
– 82
–
1,653
308
– 299
–
–
1
–
1
34
33
28
– 1,783
– 5,670
176
7
60
109
– 13
3
2
–
–
2
–
–
–
–
– 63
199
130
12,940
– 12,071
827
6,793
– 4
–
25
38
– 2,630
– 2,324
5,097
4,315
– 1,053
– 1,859
4,047
–
– 114
– 315
–
– 5
35
46
–
– 2
– 1,872
– 1,855
– 7,440
161
– 20
19
162
225
705
–
2
–
–
1
–
–
–
969
– 231
211
937
11,937
– 7,608
– 4,310
4,334
– 141
64
Depreciation and amortisation of tangible, intangible and investment assets
Other interest and similar income / expenses 2
Gain / loss on disposal of tangible and intangible assets and marketable securities
Net profit
Loss from discontinued operations
Current tax
Income taxes paid
Interest received 2
Other non-cash income and expense items
Result from equity accounted investments
Change in deferred taxes
Change in leased products
Change in receivables from sales financing
Changes in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Change in provisions
Change in other operating assets and liabilities
Cash inflow / outflow from operating activities
Proceeds from subsidies for intangible assets and property, plant and equipment
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investment assets
Acquisitions of subsidiaries and other business units
Proceeds from the disposal of investment assets and other business units
Proceeds from the sale of subsidiaries and other business units
Investments in marketable securities and investment funds
Proceeds from the sale of marketable securities and investment funds
Cash inflow / outflow from investing activities
Payments into equity
Payment of dividend for the previous year
Intragroup financing and equity transactions
Interest paid 2
Proceeds from non-current financial liabilities3
Repayment of non-current financial liabilities3
Change in other financial liabilities4
Cash inflow / outflow from financing activities
Effect of exchange rate on cash and cash equivalents
Effect of changes in composition of Group on cash and cash equivalents
1,474
2,363
129
– 1,190
Change in cash and cash equivalents
7,157
8,631
4,794
7,157
1,856
1,985
3,046
1,856
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
Group Financial Statements Loss from discontinued operations
in € million
Net profit
Current tax
Income taxes paid
Interest received 2
Other interest and similar income / expenses 2
Depreciation and amortisation of tangible, intangible and investment assets
Gain / loss on disposal of tangible and intangible assets and marketable securities
Other non-cash income and expense items
Result from equity accounted investments
Change in deferred taxes
Change in leased products
Change in receivables from sales financing
Changes in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Change in provisions
Change in other operating assets and liabilities
Cash inflow / outflow from operating activities
Total investment in intangible assets and property, plant and equipment
Proceeds from subsidies for intangible assets and property, plant and equipment
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investment assets
Acquisitions of subsidiaries and other business units
Proceeds from the disposal of investment assets and other business units
Proceeds from the sale of subsidiaries and other business units
Investments in marketable securities and investment funds
Proceeds from the sale of marketable securities and investment funds
Cash inflow / outflow from investing activities
Payments into equity
Payment of dividend for the previous year
Intragroup financing and equity transactions
Interest paid 2
Proceeds from non-current financial liabilities 3
Repayment of non-current financial liabilities 3
Change in other financial liabilities 4
Cash inflow / outflow from financing activities
Effect of exchange rate on cash and cash equivalents
Effect of changes in composition of Group on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 Interest relating to financial services business is classified as revenues / cost of sales.
3 Proceeds / Repayment of bonds are recognised under Proceeds / Repayment of non-current financial liabilities. Prior year figures adjusted accordingly.
4 The change in commercial paper is recognised under change in other financial liabilities. Prior year figures adjusted accordingly.
5 Includes dividends received from investment assets amounting to € 384 million (2017: € 258 million).
7,207
33
2,220
– 1,972
170
– 199
5,113
111
– 632
– 34
355
– 1,693
– 5,670
– 573
– 357
112
– 328
– 82
697
5,051
21
107
– 164
– 209
623 5
–
– 3,725
3,761
– 7,363
25
–
– 136
30,762
– 1,161
4,296
– 19
– 25
8,675
–
2,558
– 2,301
125
65
4,822
– 249
– 739
– 43
– 559
– 1,134
– 7,440
166
– 1,293
45
1,414
752
1,211
5,909
–
30
– 142
–
267
969
– 4,041
3,866
– 6,163
38
–
– 165
23,955
– 3,131
1,572
– 223
64
– 2,630
– 2,324
– 22,564
– 16,801
1,940
1,159
9,039
10,979
7,880
9,039
115
Group
2018
20171
Automotive
(unaudited supplementary
information)
Financial Services
(unaudited supplementary
information)
2018
20171
2018
2017
5,091
33
1,886
– 1,751
170
– 165
4,982
83
– 632
– 35
– 71
–
–
– 758
– 390
59
– 427
344
175
9,352
5,299
–
2,699
– 1,896
125
89
4,699
25
– 739
– 41
909
–
–
78
– 1,179
43
1,214
1,069
– 1,468
10,848
1,653
–
308
– 299
–
1
34
33
–
1
28
– 1,783
– 5,670
176
7
60
109
– 13
– 1,259
– 6,790
4,047
–
– 114
– 315
–
– 5
35
46
–
– 2
– 1,872
– 1,855
– 7,440
161
– 20
19
162
225
705
– 6,384
Net profit
Loss from discontinued operations
Current tax
Income taxes paid
Interest received 2
Depreciation and amortisation of tangible, intangible and investment assets
Other interest and similar income / expenses 2
Other non-cash income and expense items
Result from equity accounted investments
Gain / loss on disposal of tangible and intangible assets and marketable securities
Change in deferred taxes
Change in leased products
Change in receivables from sales financing
Changes in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Change in provisions
Change in other operating assets and liabilities
Cash inflow / outflow from operating activities
– 7,777
– 7,112
– 7,618
– 6,972
– 13
– 15
Total investment in intangible assets and property, plant and equipment
18
105
– 145
– 209
1,210
–
– 3,692
3,562
– 6,769
–
28
– 482
–
1,037
–
– 3,810
3,655
– 6,544
25
38
– 2,630
– 2,324
2,099
– 136
1
– 410
– 2
567
– 165
–
– 48
73
– 1,053
– 1,859
– 31
– 25
– 82
–
3
2
–
–
2
–
– 63
199
130
–
–
5,097
–
12,940
– 12,071
827
6,793
– 4
–
–
2
–
–
1
969
– 231
211
937
–
–
4,315
–
11,937
– 7,608
– 4,310
4,334
– 141
64
Proceeds from subsidies for intangible assets and property, plant and equipment
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investment assets
Acquisitions of subsidiaries and other business units
Proceeds from the disposal of investment assets and other business units
Proceeds from the sale of subsidiaries and other business units
Investments in marketable securities and investment funds
Proceeds from the sale of marketable securities and investment funds
Cash inflow / outflow from investing activities
Payments into equity
Payment of dividend for the previous year
Intragroup financing and equity transactions
Interest paid 2
Proceeds from non-current financial liabilities3
Repayment of non-current financial liabilities3
Change in other financial liabilities4
Cash inflow / outflow from financing activities
Effect of exchange rate on cash and cash equivalents
Effect of changes in composition of Group on cash and cash equivalents
1,474
2,363
129
– 1,190
Change in cash and cash equivalents
7,157
8,631
4,794
7,157
1,856
1,985
3,046
1,856
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
The reconciliation of liabilities from financing activities is presented in note 35.
116
BMW Group
Statement of
Changes in Equity
BMW GROUP
STATEMENT OF CHANGES IN EQUITY
in € million
31 December 2017 (as originally reported)
Effect from the first-time application of IFRS 15
31 December 2017 (adjusted according to IFRS 15)
Effects from the first-time application of IFRS 9
1 January 2018 (adjusted according to IFRS 9)
Net profit
Other comprehensive income for the period after tax
Comprehensive income at 31 December 2018
Dividend payments
Subscribed share capital increase
out of Authorised Capital
Premium arising on capital increase
relating to preferred stock
Other changes
31 December 2018
in € million
1 January 2017 (as originally reported)
Effects from the first-time application of IFRS 15
1 January 2017 (adjusted according to IFRS 15)
Net profit*
Other comprehensive income for the period after tax
Comprehensive income at 31 December 2017
(adjusted according to IFRS 15) *
Dividend payments
Subscribed share capital increase
out of Authorised Capital
Premium arising on capital increase
relating to preferred stock
Other changes*
31 December 2017 *
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
Note
31
Subscribed
capital
Capital
reserves
Revenue
reserves
658
–
658
–
658
–
–
–
–
–
–
–
2,084
51,256
–
– 441
2,084
50,815
–
178
2,084
50,993
–
–
–
–
–
34
–
7,117
718
7,835
– 2,630
–
–
– 77
31
658
2,118
56,121
– 1,326
– 1
529
58,088
Note
31
Subscribed
capital
Capital
reserves
Revenue
reserves
657
–
657
2,047
44,445
–
– 409
2,047
44,036
–
–
–
–
1
–
–
–
–
–
–
–
37
–
8,589
475
9,064
– 2,300
–
–
15
31
658
2,084
50,815
– 1,494
93
1,515
53,671
54,107
436
54,548
31 December 2017 (as originally reported)
– 441
Effect from the first-time application of IFRS 15
436
54,107
31 December 2017 (adjusted according to IFRS 15)
101
Effects from the first-time application of IFRS 9
– 1,494
11
1,515
53,772
436
54,208
1 January 2018 (adjusted according to IFRS 9)
Accumulated other equity
Derivative
financial
Securities
instruments
Equity
attributable to
shareholders
of BMW AG
Costs of
hedging
Minority
interest
Total
93
–
93
– 82
–
– 12
– 12
–
–
–
–
52
–
52
–
41
41
–
–
–
–
1,515
1,515
–
–
–
–
–
–
1,437
1,437
78
–
78
–
–
–
–
–
– 906
– 906
– 572
– 572
– 51
558
– 2
– 569
– 130
57,559
54,112
– 441
53,671
101
7,117
– 604
6,513
– 2,630
–
34
47,108
– 409
8,589
630
9,219
– 2,300
1
37
15
–
–
–
5
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
90
–
90
255
–
86
–
86
–
–
–
95
436
7,207
– 604
6,603
– 2,630
–
34
– 127
Total
47,363
– 409
8,675
630
9,305
– 2,300
1
37
110
Translation
differences
– 1,494
– 1,494
–
168
168
– 171
– 171
– 1,323
– 1,323
–
–
–
–
–
–
–
–
–
–
–
–
Accumulated other equity
Translation
differences
Derivative
financial
Securities
instruments
Equity
attributable to
shareholders
of BMW AG
Costs of
hedging
Minority
interest
Other comprehensive income for the period after tax
Comprehensive income at 31 December 2018
Net profit
Dividend payments
Subscribed share capital increase
out of Authorised Capital
Premium arising on capital increase
relating to preferred stock
Other changes
31 December 2018
1 January 2017 (as originally reported)
Effects from the first-time application of IFRS 15
Net profit*
Other comprehensive income for the period after tax
Comprehensive income at 31 December 2017
(adjusted according to IFRS 15)*
Dividend payments
Subscribed share capital increase
out of Authorised Capital
Premium arising on capital increase
relating to preferred stock
Other changes*
31 December 2017 *
46,699
255
46,954
1 January 2017 (adjusted according to IFRS 15)
Group Financial Statements
Accumulated other equity
Translation
differences
Securities
Derivative
financial
instruments
Equity
attributable to
shareholders
of BMW AG
Costs of
hedging
–
–
–
5
5
–
– 572
– 572
–
–
–
1 January 2018 (adjusted according to IFRS 9)
658
2,084
50,993
– 1,494
11
1,515
– 1,494
–
– 1,494
–
93
–
93
– 82
1,515
–
1,515
–
–
168
168
–
–
–
–
–
– 12
– 12
–
–
–
–
31
658
2,118
56,121
– 1,326
– 1
–
– 906
– 906
–
–
–
– 51
558
in € million
31 December 2017 (as originally reported)
Effect from the first-time application of IFRS 15
31 December 2017 (adjusted according to IFRS 15)
Effects from the first-time application of IFRS 9
Net profit
Other comprehensive income for the period after tax
Comprehensive income at 31 December 2018
Dividend payments
Subscribed share capital increase
out of Authorised Capital
Premium arising on capital increase
relating to preferred stock
Other changes
31 December 2018
in € million
1 January 2017 (as originally reported)
Effects from the first-time application of IFRS 15
1 January 2017 (adjusted according to IFRS 15)
Net profit*
Other comprehensive income for the period after tax
Comprehensive income at 31 December 2017
(adjusted according to IFRS 15) *
Dividend payments
Subscribed share capital increase
out of Authorised Capital
Premium arising on capital increase
relating to preferred stock
Other changes*
31 December 2017 *
Note
31
Subscribed
capital
Capital
reserves
Revenue
reserves
658
2,084
51,256
658
2,084
50,815
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
34
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37
–
– 441
178
7,117
718
7,835
– 2,630
–
–
– 77
8,589
475
9,064
– 2,300
–
–
15
Note
31
Subscribed
capital
Capital
reserves
Revenue
reserves
657
–
657
2,047
44,445
– 409
2,047
44,036
– 171
–
– 171
–
– 1,323
– 1,323
–
–
–
–
52
–
52
–
41
41
–
–
–
–
78
–
78
–
1,437
1,437
–
–
–
–
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
31
658
2,084
50,815
– 1,494
93
1,515
–
–
–
–
–
–
–
–
–
–
–
– 2
– 569
– 130
57,559
Accumulated other equity
Translation
differences
Securities
Derivative
financial
instruments
Equity
attributable to
shareholders
of BMW AG
Costs of
hedging
54,112
– 441
53,671
101
7,117
– 604
6,513
– 2,630
–
34
47,108
– 409
117
Minority
interest
436
–
436
–
Total
54,548
– 441
31 December 2017 (as originally reported)
Effect from the first-time application of IFRS 15
54,107
31 December 2017 (adjusted according to IFRS 15)
101
Effects from the first-time application of IFRS 9
53,772
436
54,208
1 January 2018 (adjusted according to IFRS 9)
90
–
90
–
–
–
3
7,207
– 604
6,603
– 2,630
–
34
– 127
529
58,088
Minority
interest
255
–
Total
47,363
– 409
Other comprehensive income for the period after tax
Comprehensive income at 31 December 2018
Net profit
Dividend payments
Subscribed share capital increase
out of Authorised Capital
Premium arising on capital increase
relating to preferred stock
Other changes
31 December 2018
1 January 2017 (as originally reported)
Effects from the first-time application of IFRS 15
46,699
255
46,954
1 January 2017 (adjusted according to IFRS 15)
8,589
630
9,219
– 2,300
1
37
15
53,671
86
–
86
–
–
–
95
436
8,675
630
9,305
– 2,300
1
37
110
54,107
Net profit*
Other comprehensive income for the period after tax
Comprehensive income at 31 December 2017
(adjusted according to IFRS 15)*
Dividend payments
Subscribed share capital increase
out of Authorised Capital
Premium arising on capital increase
relating to preferred stock
Other changes*
31 December 2017 *
118
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
NOTES TO
THE GROUP
FINANCIAL
STATEMENTS
ACCOUNTING PRINCIPLES
AND POLICIES
01
Basis of preparation
The consolidated financial statements of Bayerische
Motoren Werke Aktiengesellschaft (BMW Group
Financial Statements or Group Financial Statements)
at 31 December 2018 have been drawn up in accord-
ance with International Financial Reporting Standards
(IFRS), as endorsed by the European Union (EU), and
the supplementary requirements of § 315 a (1) of the
German Commercial Code (HGB). The Group Finan-
cial Statements and Combined Management Report
will be submitted to the operator of the electronic
version of the German Federal Gazette and can be
obtained via the Company Register website. Bayerische
Motoren Werke Aktiengesellschaft, which has its
seat at Petuelring 130, Munich, is registered in the
Commercial Register of the District Court of Munich
under the number HRB 42243.
The Group currency is the euro. All amounts are
disclosed in millions of euros (€ million) unless stated
otherwise.
The BMW Group and segment income statements are
presented using the cost of sales method.
In order to provide a better insight into the results of
operations, financial position and net assets of the
BMW Group, and going beyond the requirements of
IFRS 8 (Operating Segments), the Group Financial
Statements also include income statements and bal-
ance sheets for the Automotive, Motorcycles, Financial
Services and Other Entities segments. The Group
Cash Flow Statement is supplemented by the state-
ments of cash flows for the Automotive and Financial
Services segments. This supplementary information is
unaudited. Inter-segment transactions relate primarily
to internal sales of products, the provision of funds
for Group companies and the related interest. These
items are eliminated in the relevant “Eliminations”
columns. A description of the nature of the business
and the major operating activities of the BMW Group’s
segments is provided in
note 45 (“Explanatory notes
to segment information”).
On 19 February 2019, the Board of Management
granted approval for publication of the Group Finan-
cial Statements.
see
note 45
Group Financial Statements
119
with SGL Carbon SE concerning that entity’s gradual
acquisition of the BMW Group’s 49 % shareholding.
Accordingly, between the beginning of 2018 and the
end of 2020 at the latest, SGL Carbon SE will become
the sole owner of the hitherto joint operations. As a
consequence of the transaction, the joint operations
are no longer consolidated proportionately in the
BMW Group Financial Statements and are no longer
consolidated entities with effect from the financial
year 2018. SGL Composites LLC continues to be held
as an investment.
The BMW Group is also party to a cooperation with
Toyota Motor Corporation, Toyota City, for the devel-
opment of a sports car. This cooperation is accounted
for as a joint operation.
In the case of a joint venture, the parties which have
joint control only have rights to the net assets of the
arrangement.
Associated companies and joint ventures are accounted
for using the equity method, with measurement on
initial recognition based on acquisition cost.
The following changes took place in the Group report-
ing entity in the financial year 2018:
Included at
31 December 2017
Included for the
first time in 2018
No longer included
in 2018
Included at
31 December 2018
Germany
Foreign
Total
21
187
208
2
–
23
22
15
24
15
194
217
The BMW Group previously operated the joint ven-
tures DriveNow GmbH & Co. KG and DriveNow
Verwaltungs GmbH (DriveNow) together with Sixt SE,
Pullach. DriveNow offers car-sharing services in major
German cities and abroad. In January 2018, the
BMW Group signed an agreement with Sixt SE for
the complete acquisition of the shares in DriveNow.
02
Group reporting entity
and consolidation principles
The BMW Group Financial Statements include BMW AG
and all material subsidiaries over which BMW AG –
either directly or indirectly – exercises control. This
also includes 58 structured entities, consisting of asset-
backed securities entities and special-purpose funds.
All consolidated subsidiaries have the same year-end as
BMW AG with the exception of BMW India Private Ltd.
and BMW India Financial Services Private Ltd., whose
year-ends are 31 March in accordance with local legal
requirements.
When assessing whether an investment gives rise to a
controlled entity, an associated company, a joint oper-
ation or a joint venture, the BMW Group considers
contractual arrangements and other circumstances, as
well as the structure and legal form of the entity. Discre-
tionary decisions may also be required. If indications
exist of a change in the judgement of (joint) control, the
BMW Group undertakes a new assessment.
An entity is deemed to be controlled if BMW AG –
either directly or indirectly – has power over it, is
exposed or has rights to variable returns from it and
has the ability to influence those returns.
An entity is classified as an associated company if
BMW AG – either directly or indirectly – has the abil-
ity to exercise significant influence over the entity’s
operating and financial policies. As a general rule,
the Group is assumed to have significant influence
if it holds 20 % or more of the entity’s voting power.
Joint operations and joint ventures are forms of joint
arrangements. Such an arrangement exists when a
BMW Group entity jointly carries out activities with
a third party on the basis of a contractual agreement.
In the case of a joint operation, the parties that have
joint control of the arrangement have rights to the
assets, and obligations for the liabilities, relating to the
arrangement. Assets, liabilities, revenues and expenses
of a joint operation are recognised proportionately in
the Group Financial Statements on the basis of the
BMW Group entity’s rights and obligations (propor-
tionate consolidation). Together with SGL Carbon SE,
companies of the BMW Group were previously party
to joint operations for the manufacture of carbon
fibres and carbon fibre fabrics used in vehicle pro-
duction. In November 2017, an agreement was signed
120
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
Following approval by the antitrust authorities and
with effect from 9 March 2018, the BMW Group
acquired the remaining 50 % of the shares of the
DriveNow companies together with their subsidiaries
for a purchase price of € 209 million. The purchase
price was settled by the transfer of cash funds. The
acquisition expands the BMW Group′s strategic
options for the further development of mobility
services.
DriveNow GmbH & Co. KG and DriveNow Verwal-
tungs GmbH and their foreign subsidiaries DriveNow
Austria GmbH, DriveNow UK Limited, DriveNow
Sverige AB, DriveNow Belgium S. p. r. l. and DriveNow
Italy S. r. l. have been fully consolidated since the first
quarter of 2018.
DriveNow′s equity prior to the acquisition stood at
a negative amount of € 2 million. As a result of the
step acquisition, the shares already held by BMW
were remeasured to their fair value, giving rise to a
gain of € 209 million, which is included in the result
on investments. The fair value of shares already held
amounts to € 209 million.
The following table shows the purchase price allocation:
in € million
IdentIfIed ASSetS
Intangible assets
Trademarks
Trade receivables
Other receivables
Inventories
Cash and cash equivalents
IdentIfIed lIAbIlItIeS
Provisions
Trade payables
Deferred tax liabilities
Other liabilities
Total identified net assets
GoodwIll CAlCulAtIon
Consideration transferred (purchase price)
Total identified net assets
Goodwill
Fair values at
acquisition date
111
22
9
7
1
5
16
5
34
3
97
418
97
321
On 28 March 2018, the BMW Group signed an agree-
ment with Daimler – subject to anti-trust approval –
regarding the merger of certain business units that
provide mobility services. DriveNow is part of this
agreement and is therefore accounted for as a dis-
continued operation.
Assets and liabilities totalling € 461 million and
€ 62 million respectively are reported as discontin-
ued operations at 31 December 2018. These items are
disclosed separately in the Group Balance Sheet and
allocated to the Automotive segment. The loss after
tax from discontinued operations for the financial
year 2018 amounted to € 33 million. This amount is
also disclosed separately in the Income Statements
for the Group and Segments.
Following approval by the antitrust authorities and
with effect from 31 January 2019, the BMW Group
has now completed the agreement with the Daimler
Group regarding the merger of certain business units
that provide mobility services. Existing on- demand
mobility offerings in the areas of car sharing, ride-
hailing, parking, charging and multi-modality will
be combined and strategically expanded. The
BMW Group and the Daimler Group each hold equal
shares in the joint ventures that comprise the mobility
services referred to above.
As a result of the merger, the investments in the
companies previously held by BMW will be remea-
sured to their fair value. This will give rise to a one-off
positive effect on Group earnings in the region of
between € 100 million and € 300 million. Due to the
fact that the transaction was completed shortly after
the BMW Group’s year-end, 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. The disclosures
made should be regarded as provisional since no fur-
ther information is available at present.
Group Financial Statements 121
translated using the modified closing rate method.
Under this method, assets and liabilities are translat-
ed at the closing exchange rate, whilst income and
expenses are translated at the average exchange rate.
Differences arising on foreign currency translation are
presented in “Accumulated other equity”.
In the single entity accounts of BMW AG and its sub-
sidiaries, foreign currency receivables and payables
are measured on initial recognition using the exchange
rate prevailing at the date of first-time recognition.
At the end of the reporting period, foreign currency
receivables and payables are measured using the clos-
ing exchange rate. The resulting unrealised gains and
losses, as well as realised gains and losses arising on
settlement, are recognised in the income statement.
Non-monetary balance sheet items denominated in
foreign currencies are rolled forward on the basis of
historical exchange rates.
The exchange rates of currencies which have a mate-
rial impact on the Group Financial Statements were
as follows:
Closing rate
Average rate
31. 12. 2018
31. 12. 2017
0.89
7.87
125.77
1,271.07
79.72
16.45
1.14
0.89
7.80
134.93
1,281.41
69.04
14.81
1.20
2018
0.88
7.81
130.36
1,298.78
74.07
15.62
1.18
2017
0.88
7.63
126.68
1,276.47
65.91
15.04
1.13
In December 2017, BMW AG, Audi AG, Ingolstadt,
and Daimler AG, Stuttgart, signed agreements to sell
shares in THERE Holding B. V. (THERE) to Robert
Bosch Investment Nederland B. V., Boxtel, and to
Continental Automotive Holding Netherlands B. V.,
Maastricht. Each of these two parties acquired 5.9 % of
the shares, which were sold in equal parts by BMW AG,
Audi AG and Daimler AG. The transactions were
completed during the first quarter of 2018. The sale
does not have a significant impact on the results of
operations, financial position and net assets of the
BMW Group.
The other changes to the Group reporting entity do
not have a material impact on the results of operations,
financial position and net assets of the Group.
03
Foreign currency translation and measurement
The financial statements of consolidated compa-
nies which are presented in a foreign currency are
1 Euro =
British Pound
Chinese Renminbi
Japanese Yen
Korean Won
Russian Rubel
South African Rand
US-Dollar
Argentina has fulfilled the definition of a hyperinfla-
tionary economy since 1 July 2018. For this reason,
IAS 29 (Financial Reporting in Hyperinflationary
Economies) is being applied for the BMW subsidiary in
Argentina with effect from the financial year 2018. The
price indices published by the Federación Argentina
de Consejos Profesionales de Ciencias Económicas
(FACPCE) are used to adjust non- monetary assets and
liabilities and items in the income statement. The
resulting effects are not significant for the BMW Group
and for this reason prior year figures have not been
adjusted.
122
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
04
Accounting policies, assumptions, judgements
and estimations
Revenues from contracts with customers include in
particular revenues from the sale of products and
leased assets as well as from services. Revenue is
recognised when control is transferred to the deal-
ership or retail customer. This is usually the case
at the point in time when the risks and rewards of
ownership are transferred. In the case of services,
control is transferred over time. Revenues are stated
net of settlement discount, bonuses and rebates as well
as interest and residual value subsidies. Variable con-
sideration components, such as bonuses and interest
subsidies, are measured at the expected value and, in
the case of multi-component contracts, allocated to all
performance obligations unless directly attributable
to the sale of a vehicle. The consideration arising from
these sales usually falls due for payment immediately
or within 30 days. In exceptional cases, a longer pay-
ment may also be agreed.
Consideration for the rendering of services to customers
usually falls due for payment at the beginning of a
contract and is deferred as a contract liability under
deferred income. The deferred amount is released over
the service period and recognised as revenue in the
income statement. Reflecting the fact that expenses
are incurred over the period in which services are ren-
dered, deferred income is released on the basis of the
expected cost trend. If the sale of products includes a
determinable amount for services (multiple- component
contracts), the related revenues are deferred and
recognised as income in the same way.
Revenues from the sale of vehicles, for which repur-
chase arrangements are in place, are not recognised
immediately in full. Instead, revenues are either recog-
nised proportionately or the difference between the
sales and repurchase price recognised in instalments
over the term of the contract depending on the nature
of the agreement. This includes in particular revenues
from vehicle sales, where it is expected that vehicles
will return to the Group as leased vehicles in the
subsequent period. In this case, assets and liabilities
relating to rights of return are recognised.
Revenues also include lease rentals and interest
income from financial services. Income from lease
instalments arising on operating leases is recognised
on a straight-line over the lease term. Interest income
arising on finance leases as well as on retail customer
and dealership financing is recognised using the effec-
tive interest method and reported as interest income
on loan financing within revenues.
Public sector grants are not recognised until there is
reasonable assurance that the conditions attaching to
them have been complied with and the grants will be
received. The resulting income is recognised in cost
of sales over the periods in which the costs occur that
they are intended to compensate.
Earnings per share are calculated as follows: Basic
earnings per share are calculated for common and
preferred stock by dividing the net profit for the year
after minority interests and attributable to each cate-
gory of stock, by the average number of outstanding
shares. Net profit for the year is accordingly allocated
to the different categories of stock. The portion of
net profit that is not being distributed is allocated
to each category of stock based on the number of
outstanding shares. Profits available for distribution
are determined directly on the basis of the dividend
resolutions passed for common and preferred stock.
Diluted earnings per share are calculated and sepa-
rately disclosed in accordance with IAS 33.
Purchased and internally-generated intangible assets
are recognised as assets where it is probable that the
use of the asset will generate future economic benefits
and where the costs of the asset can be determined
reliably. Such assets are measured at acquisition
or manufacturing cost, as a general rule without
financing costs, and, to the extent that they have a
finite useful life, amortised on a straight-line basis
over their estimated useful lives. With the exception
of capitalised development costs, intangible assets
are amortised as a general rule over their estimated
useful lives of between three and 20 years.
Development costs for vehicle, module and architecture
projects are capitalised at manufacturing cost, to the
extent that attributable costs (including development-
related overhead costs) can be measured reliably and
both technical feasibility and successful marketing
are assured. It must also be sufficiently probable that
the development expenditure will generate future
economic benefits. Capitalised development costs are
amortised on a straight-line basis following the start
of production over the estimated product life cycle
(usually five to 12 years).
Group Financial Statements
123
into account. Forecasting assumptions are continually
adjusted to current information and regularly com-
pared with external sources. The assumptions used
take account in particular of expectations of the prof-
itability of the product portfolio, future market share
development, macroeconomic developments (such
as currency, interest rate and raw materials prices)
as well as the legal environment and past experience.
Amounts are discounted on the basis of a market-
related cost of capital rate. Impairment tests for the
Automotive and Motorcycles cash-generating units
are performed using a risk-adjusted pre-tax cost of
capital (WACC). In the case of the Financial Services
cash-generating unit, a pre-tax cost of equity capital
is used, as is customary in the sector. The following
discount factors were applied:
in %
2018
2017
Automotive
Motorcycles
Financial Services
12.0
12.0
13.4
12.0
12.0
13.4
The risk-adjusted discount rate, calculated using a
CAPM model, also takes into account specific peer-
group information relating to beta-factors, capital
structure data and borrowing costs. In conjunction
with the impairment tests for cash-generating units,
sensitivity analyses are performed for the main
assumptions in order to rule out that possible changes
to the assumptions used to determine the recoverable
amount would result in the requirement to recognise
an impairment loss.
Goodwill arises on first-time consolidation of an
acquired business when the cost of acquisition
exceeds the Group’s share of the net fair value of the
assets, liabilities and contingent liabilities identified
during the acquisition.
If there is any indication of impairment of intangible
assets, or if an annual impairment test is required
(i. e. intangible assets with an indefinite useful life,
intangible assets during the development phase and
goodwill), an impairment test is performed. Each
individual asset is tested separately unless the cash
flows generated by the asset are not sufficiently inde-
pendent from the cash flows generated by other assets
or other groups of assets. In this case, impairment is
tested at the level of a cash-generating unit.
For the purpose of the impairment test, the carrying
amount of an asset (or a cash-generating unit) is com-
pared with the recoverable amount. The first step of
the impairment test is to determine the value in use.
If the value in use is lower than the carrying amount,
the next step is to determine the fair value less costs to
sell and compare the amount so determined with the
asset’s carrying amount. If the fair value is lower than
the carrying amount, an impairment loss is recognised,
reducing the carrying amount to the higher of the
asset’s value in use or fair value less costs to sell.
If the reason for a previously recognised impairment
loss no longer exists, the impairment loss is reversed
up to the level of the recoverable amount, but no higher
than the amortised acquisition or manufacturing cost.
Impairment losses on goodwill are not reversed.
As part of the process of assessing recoverability, it is
generally necessary to apply estimations and assump-
tions – in particular regarding future cash inflows and
outflows and the length of the forecast period – which
could differ from actual amounts. Actual amounts
may differ from the assumptions and estimations
used if business conditions develop differently to
expectations.
The BMW Group determines the value in use on the
basis of a present value computation. Cash flows
used for this calculation are derived from long-term
forecasts approved by management. These long-term
forecasts are based on detailed forecasts drawn up
at an operational level and, with a planning period
of six years, correspond roughly to a typical product
life cycle of vehicle projects. For the purposes of cal-
culating cash flows beyond the planning period, a
residual value is assumed which does not take growth
124
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
All items of property, plant and equipment are measured
at acquisition or manufacturing cost less accumulated
depreciation and accumulated impairment losses. The
cost of internally constructed plant and equipment
comprises all costs which are directly attributable
to the manufacturing process as well as an appro-
priate proportion of production-related overheads.
This includes production-related depreciation and
amortisation as well as an appropriate proportion
of administrative and social costs. Financing costs
are not included in acquisition or manufacturing cost
unless they are directly attributable to the asset. The
carrying amount of items of depreciable property,
plant and equipment is written down according to
scheduled usage-based depreciation – as a general
rule on a straight-line basis – over the useful lives of
the assets. Depreciation is recorded as an expense in
the income statement.
The following useful lives are applied throughout the
BMW Group:
in years
Factory and office buildings, residential buildings, fixed
installations in buildings and outside facilities
Plant and machinery
Other equipment, factory and office equipment
8 to 50
3 to 21
2 to 25
For machinery used in multiple-shift operations,
depreciation rates are increased to account for the
additional utilisation. If there is any indication of
impairment of property, plant and equipment, an
impairment test is performed as described above for
intangible assets.
With respect to lease arrangements of the BMW Group,
use of judgement is required, in particular with regard
to the transfer of economic ownership of a leased item.
Leased items of property, plant and equipment whose
economic ownership is attributed to the BMW Group
(finance leases) are measured on initial recognition at
their fair value or, if lower, at the net present value of
minimum lease payments. The assets are depreciated
using the straight-line method over their estimated
useful lives or, if shorter, over the contractual lease
period. Obligations for future lease payments are
recognised at their net present value in other financial
liabilities.
Group products recognised by BMW Group entities as
leased products under operating leases are measured at
manufacturing cost, including any initial direct costs.
All other leased products are measured at acquisition
cost. All leased products are depreciated over the period
of the lease using the straight-line method down to
their expected residual value. Where the recoverable
amount of a lease exceeds the asset’s carrying amount,
changes in residual value expectations are recognised
by adjusting scheduled depreciation prospectively
over the remaining term of the lease. If the recoverable
amount is lower than the asset′s carrying amount,
an impairment loss is recognised for the shortfall. A
test is carried out at each balance sheet date to deter-
mine whether an impairment loss recognised in prior
periods no longer exists or has decreased. In such
cases, the carrying amount of the asset is increased
to the recoverable amount, at a maximum up to the
amount of the asset’s amortised cost.
Assumptions and estimations are required regarding
future residual values, since these represent a signif-
icant part of future cash inflows. Relevant factors
to be considered include the trend in market prices
and demand on the pre-owned vehicle market. The
assumptions are based on internally available historical
data and current market data as well as on forecasts of
external institutions. Furthermore, assumptions are
regularly validated by comparison with external data.
Investments accounted for using the equity method are
measured – provided no impairment has been recog-
nised – at cost of investment adjusted for the Group’s
share of earnings and changes in equity capital.
The Group′s financial assets include in particular other
investments, receivables from sales financing, mar-
ketable securities and investment funds, derivative
financial assets, trade receivables and cash and
cash equivalents. Non-derivative financial assets are
ac counted for on the basis of the settlement date.
Group Financial Statements 125
which had not been credit-impaired at the time they
were acquired or originated, an impairment allowance
is recognised at an amount equal to lifetime expected
credit losses (stage 3). This is the case regardless of
whether the general or simplified approach is applied.
As a general rule, the BMW Group assumes that a
receivable is in default if it is more than 90 days
overdue or if there are objective indications of insol-
vency. Credit-impaired assets are identified as such
on the basis of this definition of default. In the case
of stage 3 assets, interest income is calculated on the
asset’s carrying amount less any impairment loss.
Loss allowances on receivables from sales financing
are determined primarily on the basis of past expe-
rience with credit losses, current data on overdue
receivables, rating classes and scoring information.
Forward-looking information (for instance forecasts of
key performance indicators) is also taken into account
if, based on past experience, such indicators show a
substantive correlation to actual credit losses.
The measurement of the change in default risk is based
on a comparison of the default risk at the date of initial
recognition and at the end of the reporting period.
The default risk at the end of each reporting period
is determined on the basis of credit checks, current
key economic indicators and any overdue payments.
Loss allowances on trade receivables are determined
primarily on the basis of information relating to over-
due amounts. In the case of marketable securities and
investment funds, the BMW Group usually applies
the option not to allocate financial assets with a low
default risk to different stages. Accordingly, assets
with an investment grade rating are always allocated to
stage 1. The loss allowance on these assets is calculated
using the input factors available on the market, such
as ratings and default probabilities.
The BMW Group writes off financial assets when it has
no reasonable expectation of recovering the amounts
concerned. This may be the case, for instance, if the
debtor is deemed not to have sufficient assets or other
sources of income to service the debt.
Depending on the business model and the structure of
contractual cash flows, financial assets are classified
as measured at amortised cost, at fair value through
comprehensive income or at fair value through profit
or loss. The category “at fair value through compre-
hensive income” at the BMW Group comprises mainly
marketable securities and investment funds used for
liquidity management purposes. Selected marketable
securities and investment fund, money market funds
within cash and cash equivalents as well as convertible
bonds are recognised at fair value through profit or
loss, as their contractual cash flows do not solely
represent payments of principal and interest.
The market values of financial instruments measured
at fair value are determined on the basis of market
information available at the balance sheet date, such
as quoted prices or using appropriate measurement
methods, in particular the discounted cash flow method.
Items reported under other investments within the
scope of IFRS 9 are measured at fair value through
profit or loss. Investments in subsidiaries, joint
arrangements and associated companies that are not
material to the BMW Group and which do not fall
within the scope of IFRS 9 are also included in other
investments.
Receivables from sales financing are measured at amor-
tised cost using the effective interest rate method. This
also includes receivables arising on vehicle finance
leases.
With the exception of operating lease and trade
receivables, the BMW Group applies the general
approach described in IFRS 9 to determine impairment
of financial assets. Under the general approach, loss
allowances are measured on initial recognition on the
basis of the expected 12-month credit loss (stage 1). If
the credit loss risk at the end of the reporting period
has increased significantly since initial recognition,
the impairment allowance is measured on the basis
of lifetime expected credit losses (stage 2 – general
approach). The BMW Group applies the simplified
approach described in IFRS 9 to operating lease
and trade receivables, whereby the amount of the
loss allowance is measured subsequent to the initial
recognition of the receivable on the basis of lifetime
expected credit losses (stage 2 – simplified approach).
For the purposes of allocating an item to stage 2, it
is irrelevant whether the credit risk of the asset
concerned has increased significantly since initial
recognition. In the case of credit-impaired assets
126
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
Derivative financial instruments are used within the
BMW Group for hedging purposes in order to reduce
currency, interest rate, fair value and market price
risks. All derivative financial instruments are mea-
sured at their fair value. Fair values are determined
on the basis of valuation models. Observable market
price, tenor and currency basis spreads are taken into
account in the measurement of derivative financial
instruments. Furthermore, the Group′s own credit
risk and that of counterparties is taken into account
on the basis of credit default swap values for market
contracts with matching terms.
The BMW Group applies the option to recognise the
credit risks arising from the fair values of a group of
derivative financial assets and liabilities on the basis
of their total net amount. Portfolio-based valuation
adjustments (credit valuation adjustments and debit
valuation adjustments) to the individual derivative
financial assets and financial liabilities are allocated
using the relative fair value approach (net method).
Where hedge accounting is applied, changes in fair value
are recognised in the income statement in sundry other
financial result or in other comprehensive income as
a component of accumulated other equity, depending
on whether the hedging relationship is classified as a
fair value hedge or a cash flow hedge. Fair value hedges
are mainly used to hedge interest rate risks relating to
bonds, other financial liabilities and receivables from
sales financing. Cross currency basis spreads are not
designated as part of the hedging relationship in the
case of interest rate hedges accounted for as fair value
hedges. Accordingly, changes in the market value of
such instruments are recorded as costs of hedging
within accumulated other equity. Amounts recorded
in equity are reclassified to the income statement over
the term of the hedging relationship.
The time values of option transactions and the interest
component of forward currency contracts are not des-
ignated as part of the hedging relationship in the case
of currency hedges accounted for as cash flow hedges.
Changes in the market value of such components are
recorded as costs of hedging on a separate line within
accumulated other equity. Amounts accumulated in
other equity from currency hedges are reclassified to
cost of sales when the related hedged item is recog-
nised in profit or loss.
In the case of raw materials hedges that are accounted
for as cash flow hedges, the hedging instruments are
designated in full as part of the hedging relationship.
As an exception to this general rule, the interest
component of raw materials derivative instruments
redesignated in conjunction with the first-time
application of IFRS 9 was not designated as part of the
hedging relationship. Changes in the fair value of
this component are recorded as costs of hedging
on a separate line within accumulated other equity.
Amounts recorded in accumulated other equity are
included in the carrying amount of inventories on
initial recognition.
Deferred taxes are recognised on all temporary differ-
ences between the tax and accounting bases of assets
and liabilities and on consolidation procedures. The
recoverability of deferred tax assets is assessed at each
balance sheet date on the basis of planned taxable
income in future financial years. If with a probabil-
ity of more than 50 percent future tax benefits will
not be realised, either in part or in total, a valuation
allowance is recognised on the deferred tax assets. The
calculation of deferred tax assets requires assumptions
to be made with regard to the level of future taxable
income and the timing of recovery of deferred tax
assets. These assumptions take account of forecast
operating results and the impact on earnings of the
reversal of taxable temporary differences. Since future
business developments cannot be predicted with cer-
tainty and to some extent cannot be influenced by the
BMW Group, the measurement of deferred tax assets
is subject to uncertainty. Deferred taxes are calculated on
the basis of tax rates which are applicable or expected
to apply in the relevant national jurisdictions when
the amounts are recovered.
Current income taxes are calculated within the
BMW Group on the basis of tax legislation applicable
in the relevant countries. To the extent that judgement
was necessary to determine the treatment and amount
of tax items presented in the financial statements,
there is in principle a possibility that local tax author-
ities may take a different position.
Inventories of raw materials, supplies and goods for
resale are stated at the lower of average acquisition
cost and net realisable value.
Group Financial Statements Work in progress and finished goods are stated at
the lower of manufacturing cost and net realisable
value. Manufacturing cost comprises all costs which
are directly attributable to the manufacturing process
as well as an appropriate proportion of production-
related overheads. This includes production-related
depreciation and amortisation and an appropriate
proportion of administrative and social costs. Financ-
ing costs are not included in the acquisition or man-
ufacturing cost of inventories.
Cash and cash equivalents comprise mainly cash on hand
and cash at bank with an original term of up to three
months. With the exception of money market funds,
cash and cash equivalents are measured at amortised
cost.
Provisions for pensions are measured using the projected
unit credit method. Under this method, not only
obligations relating to known vested benefits at the
reporting date are recognised, but also the effect of
future expected increases in pensions and salaries. The
calculation is based on independent actuarial valua-
tions which take into account relevant biometric factors.
In the case of funded plans, the pension obligation is
offset against plan assets measured at their fair value.
If the plan assets exceed the pension obligation, the
surplus is tested for recoverability. In the event that
the BMW Group has a right of reimbursement or a
right to reduce future contributions, it reports an asset
(within Other financial assets), measured on the basis
of the present value of the future economic benefits
attached to the plan assets. For funded plans, in cases
where the obligation exceeds plan assets, a liability is
recognised under pension provisions.
The calculation of the amount of the provision
requires assumptions to be made with regard to
discount rates, salary trends, employee fluctuation
and the life expectancy of employees. Discount rates
are determined by reference to market yields at the
end of the reporting period on high quality fixed-in-
terest corporate bonds. The salary trend relates to
the expected future rate of salary increase which is
estimated annually based on inflation and the career
development of employees within the Group.
127
Net interest expense on the net defined benefit lia-
bility and net interest income on net defined benefit
assets are presented separately within the financial
result. All other costs relating to allocations to pension
provisions are allocated to costs by function in the
income statement.
Past service cost arises where a BMW Group com-
pany introduces a defined benefit plan or changes
the benefits payable under an existing plan. This cost
is recognised immediately in the income statement.
Similarly, gains and losses arising on the settlement
of a defined benefit plan are recognised immediately
in the income statement.
Remeasurement of the net liability can result from
changes in the present value of the defined benefit
obligation, the fair value of the plan assets or the
asset ceiling. Remeasurement can result, amongst
others, from changes in financial and demographic
parameters, as well as changes following the portfolio
development. Remeasurements are recognised imme-
diately in other comprehensive income and hence
directly in equity (within revenue reserves).
Other provisions are recognised when the BMW Group
has a present legal or factual obligation towards a third
party arising from past events, the settlement of which
is probable, and when the amount of the obligation
can be reliably estimated. Provisions with a remaining
period of more than one year are measured at their
net present value.
The measurement of provisions for statutory and
non-statutory warranty obligations (statutory, contractual
and voluntary) involves estimations. In addition to manu-
facturer warranties prescribed by law, the BMW Group
offers various further standard (assurance-type) war-
ranties depending on the product and sales market.
No provisions are recognised for additionally pur-
chased service packages that are treated as separate
performance obligations.
128
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
Provisions for statutory and non-statutory warranties
are recognised at the point in time when control over
the goods is transferred to the dealership or retail
customer or when a new category of warranty is
introduced. With respect to the level of the provi-
sion, estimations are made in particular based on past
experience of damage claims and processes. Future
potential repair costs and price increases per product
and market are also taken into account. Provisions
for warranties for all companies of the BMW Group
are adjusted regularly to take account of new infor-
mation, with the impact of any changes recognised
in the income statement. Further information is pro-
vided in
note 33. Similar estimates are also made
in conjunction with the measurement of expected
reimbursement claims.
The recognition and measurement of provisions
for litigation and liability risks necessitates making
assumptions in order to determine the probability of
liability, the amount of claim and the duration of the
legal dispute. The assumptions made, especially the
assumption about the outcome of legal proceedings,
are subject to a high degree of uncertainty. The appro-
priateness of assumptions is regularly reviewed, based
on assessments undertaken both by management and
external experts, such as lawyers. If new developments
arise in the future that result in a different assessment,
provisions are adjusted accordingly.
If the recognition and measurement criteria relevant
for provisions are not fulfilled and the outflow of
resources on fulfilment is not unlikely, the potential
obligation is disclosed as a contingent liability.
Related party disclosures comprise information on
associated companies, joint ventures and non-con-
solidated subsidiaries as well as individuals which
have the ability to exercise a controlling or significant
influence over the financial and operating policies
of the BMW Group. This includes all persons in key
positions of the Company, as well as close members
of their families or intermediary entities. In the case
of the BMW Group, this also applies to members of
the Board of Management and the Supervisory Board.
Details relating to these individuals and entities are
provided in
note 40 and in the list of investments
disclosed in
note 46.
Share-based remuneration programmes which are ex pected
to be settled in shares are measured at their fair value
at grant date. The related expense is recognised as
personnel expense in the income statement over the
vesting period and offset against capital reserves.
Share-based remuneration programmes expected to
be settled in cash are revalued to their fair value at
each balance sheet date between the grant date and
the settlement date and on the settlement date itself.
The expense is recognised as personnel expense in
the income statement over the vesting period and
presented in the balance sheet as a provision.
The share-based remuneration programme for Board
of Management members and senior heads of depart-
ment entitles BMW AG to elect whether to settle its
commitments in cash or with shares of BMW AG
common stock. Based on the decision to settle in cash,
the share-based remuneration programmes for Board
of Management members and senior heads of depart-
ment are accounted for as cash-settled, share-based
remuneration programmes. Further information on
share-based remuneration programmes is provided
in
note 41.
see
note 33
see
not 41
see
note 40 and 46
Group Financial Statements 05
Financial reporting rules
(a) Standards and Revised Standards significant for
the BMW Group applied for the first time in the
financial year 2018:
Standard / Interpretation
IFRS 15
Revenue from Contracts with Customers
IFRS 9
IFRIC 22
Financial Instruments
Foreign Currency Transactions and Advance Consideration
129
Date of
issue by
IASB
28. 5. 2014
11. 9. 2015
12. 4. 2016
24. 7. 2014
8. 12. 2016
Date of
mandatory
application
IASB
Date of
mandatory
application
EU
1. 1. 2018
1. 1. 2018
1. 1. 2018
1. 1. 2018
1. 1. 2018
1. 1. 2018
Changes due to the new accounting standards IFRS 15
and IFRS 9 are described in
notes 6 and 7.
see
note 6 and 7
The Interpretation IFRIC 22 clarifies that when
a non-monetary asset or liability denominated in
a foreign currency is recognised, any payments or
receipt of advance consideration should be based on
the exchange rate prevailing at the date of payment.
This situation is relevant in individual cases within
the BMW Group.
(b) Financial reporting pronouncements issued by
the IASB that are significant for the BMW Group,
but have not yet been applied:
Standard / Interpretation
IFRS 16
Leases
The new Standard IFRS 16 (Leases) sets out a new
approach to accounting for leases by lessees. While
under IAS 17, the accounting treatment of a lease
was determined on the basis of the transfer of risks
and rewards incidental to ownership of the asset, in
the future, each lease arrangement will, as a general
rule, be accounted for by the lessee in a similar way
to finance leases.
The BMW Group will use the grandfather clause
available for existing leases and apply the available
exemptions regarding the recognition of short-term
leases and low-value leasing assets. The new Standard
will be applied for the first time using the modified
retrospective method. Intragroup leasing arrange-
ments are not reflected in the internal management
system or in internal reporting pursuant to IFRS 16
and therefore, in accordance with IFRS 8, do not
result in any changes in the presentation of segment
information. IFRS 16 has not been adopted prior to
the mandatory application date.
Date of
issue by
IASB
Date of
mandatory
application
IASB
Date of
mandatory
application
EU
13. 1. 2016
1. 1. 2019
1. 1. 2019
The impact on the BMW Group′s results of operations,
financial position and net assets is currently being
analysed as part of a Group-wide implementation
project. A new IT system has been introduced to
account for right-of-use assets and lease liabilities in
the future. At the date of initial adoption, the balance
sheet total is expected to increase by approximately
€ 2.3 billion as a result of leases previously classified
as operating leases. The reclassification results in a
slight decline in the equity ratio. For a small number of
contracts, the carrying amount of a right-of-use asset
will be determined as if IFRS 16 had been applied from
the inception of the lease. After offsetting deferred
tax effects amounting to € 13 million, this results in
a reduction of approximately € 32 million in Group
revenue reserves at 1 January 2019. In subsequent
periods, the BMW Group expects a slightly positive
impact on profit before financial result and on cash
inflows / outflows from operating activities and a
slightly negative impact on cash inflows / outflows
from financing activities.
130
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
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 of accounting policy
as described below with effect from the financial year
2019. The change in accounting policy will be applied
retrospectively, with comparative figures restated. In
this context, it will be necessary to restate the opening
balance sheet as at 1 January 2018 and figures for the
financial year 2018.
As a result of the revised definition of initial direct costs
contained in IFRS 16, the BMW Group will change the
timing of income statement recognition for volume-
dependent bonuses relating to Financial Services
segment sales promotions. Rather than being spread
over the term of the underlying lease, in future these
costs will be recognised as an expense in full in the
period in which the entitlement to the bonus arises.
This results in a retrospective decrease in Group
revenue reserves at 1 January 2018 of € 101 million,
after offset of deferred tax amounting to € 44 million
(31 December 2018: reduction of revenue reserves of
€ 113 million, after offset of deferred tax amounting
to € 49 million).
Services segment in accordance with the requirements
applicable to manufacturers or dealers. For this reason,
in future, revenues and cost of sales arising on the
sale of vehicles which will subsequently be leased to
customers under finance lease arrangements will be
recognised at a later date. Revenues and cost of sales
relating to vehicle sales will no longer be recognised at
the time of sale, but rather at the commencement date
of the lease. Revenues will be recognised on the basis
of the leased asset’s fair value, reduced by any unguar-
anteed residual value of vehicles that are expected
to be returned to the Group. Cost of sales will also be
reduced for unguaranteed residual values. In addition,
initial direct costs incurred by the Financial Services
segment will be recognised at Group level as cost of
sales. Overall, this results in a retrospective decrease
in Group revenue reserves as at 1 January 2018 of
€ 15 million, after offset of deferred tax amounting to
€ 4 million (31 December 2018: decrease of revenue
reserves of € 146 million, after offset of deferred tax
amounting to € 44 million). The adoption of these
requirements will not have a material impact on the
accounting in the Automotive and Financial Services
segments.
The first-time application of IFRS 16 with effect from
1 January 2019, in conjunction with IFRS 15, will also
require the BMW Group to account for finance leases
concluded with retail customers via the Financial
The following table provides an overview of the
expected effects on revenue reserves from the first-
time application of IFRS 16 and the related change
in the methods used to account for leases as a lessor:
Impact on
revenue reserves
After-tax
earnings impact
Impact on
revenue reserves
in € million
Change
1. 1. 2018
2018
1. 1. 2019
Segment
Lessee
Lessor
Lessor
Measurement of right-of-use assets as if IFRS 16 had
been applied from the inception of the contract
First-time application of requirements applicable to
finance leases of manufacturers or dealers
Changes in timing of income statement recognition of
volume-dependent bonuses
Total impact
–
– 15
– 101
– 116
–
– 131
– 12
– 143
– 32
– 146
– 113
– 291
Automotive
Eliminations
Financial Services
Other financial reporting standards issued by the IASB
and not yet applied are not expected to have any
significant impact on the BMW Group Financial
Statements.
Group Financial Statements 06
First-time application of IFRS 15
The new Standard IFRS 15 (Revenue from Contracts with
Customers) assimilates the numerous requirements
and interpretations relating to revenue recognition
into a single Standard. The new Standard also stip-
ulates uniform revenue recognition principles for all
sectors and all categories.
In accordance with the transitional provisions con-
tained in IFRS 15, the BMW Group has applied the
new requirements for revenue from contracts with
customers in the 2018 financial year using the full
retrospective option. For this reason, the opening bal-
ance sheet at 1 January 2017, the figures reported for
the previous year and the balance sheet at 31 Decem-
ber 2017 have been adjusted and made comparable.
The exemption provision, allowing contracts fulfilled
prior to 1 January 2017 not to be newly assessed in
accordance with IFRS 15, has been applied. The impact
of applying the exemption is classified as insignificant
due to the fact that it only affects the BMW Group in
a few individual cases.
Revenue recognition from contracts with customers
is based on a five-stage model. Revenues are required
to be recognised either over time or at a specific point
in time. A major difference to the previous Standard
is the increased scope of discretion for estimates and
the introduction of thresholds, thus influencing the
amount and timing of revenue recognition.
Accounting for buyback arrangements and rights
of return for vehicles sold, but which the Financial
Services segment will subsequently lease to customers,
results in the earlier recognition of intragroup elimina-
tions. The adoption of IFRS 15 results in a retrospective
decrease in Group equity at 1 January 2017 amounting
to € 498 million, after offset of deferred tax amount-
ing to € 239 million (31 December 2017: reduction
of revenue reserves by € 553 million, after offset of
deferred tax amounting to € 192 million). The lower
amount of deferred tax at 31 December 2017 results
from the reduction of the US federal corporate tax
rate with effect from 1 January 2018. The earlier date
for consolidating intragroup transactions also results
in the recognition of assets and liabilities relating to
rights of return, causing other current assets and other
current liabilities to increase. The impact on earnings
in the financial year 2018 was not significant.
131
In accordance with IFRS 15, costs incurred for sales
promotion measures in the Automotive segment,
such as sales support or residual value subsidies,
are required to be treated as variable components of
consideration and therefore have the effect of reducing
revenue. Variable consideration is measured on the
basis of the amount of consideration to which the
BMW Group expects to be entitled. Some of these
costs were previously reported as cost of sales. The
change in classification in the income statement
results in a decrease in both revenues and cost of
sales. For the financial year 2017, the retrospective
reclassification recorded by the Automotive segment
amounted to € 2.9 billion, which did not, however,
have a significant impact at Group level.
If the sale of products includes a determinable amount
for services (multiple-component contracts), the related
revenues are deferred and recognised as income
over time. Variable consideration to be received for
multi-component contracts is allocated across all
service obligations unless it is directly attributable
to the sale of the vehicle. As a result of the change
in accounting policy for multi-component contracts
with variable consideration components, changes
in the allocation of transaction prices result for the
Automotive segment in higher amounts being recog-
nised for vehicle sales and a lower level of amounts
deferred for service contracts. The shift in the timing
of revenue recognition resulted in a retrospective
increase in Group revenue reserves at 1 January 2017
of € 89 million, after offset of deferred tax amounting to
€ 38 million (31 December 2017: increase in Group rev-
enue reserves of € 112 million, after offset of deferred
tax amounting to € 42 million). The impact on earnings
in the financial year 2018 was not significant.
As a result of the retrospective adjustments described
above, the Automotive segment’s EBIT margin for
the financial year 2017 improved by 0.3 percentage
points to 9.2 %.
A different accounting treatment may be required if
buyback arrangements are in place with customers,
resulting in a shift in the timing of revenue recogni-
tion. The resulting impact was not significant.
Buyback arrangements between the Automotive and
Financial Services segments are not reflected in the
internal management system or reporting and there-
fore, in accordance with IFRS 8, do not result in any
changes in the presentation of segment information.
132
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
The following tables show the impact on the balance
sheets at 1 January 2017 and 31 December 2017,
as well as on the income statement, statement of
comprehensive income and cash flow statement for
the financial year 2017:
BMW Group change in presentation of balance sheet at 1 January 2017
• 69
in € million
ASSetS
Total non-current assets
thereof investments accounted for using the equity method
thereof deferred tax
thereof other assets
Total current assets
thereof other assets
Total assets
equIty A nd lIAbIlItI eS
Total equity
thereof equity attributable to shareholders of BMW AG
thereof revenue reserves
Total non-current provisions and liabilities
thereof other provisions
thereof deferred tax
thereof other liabilities
Total current provisions and liabilities
thereof other provisions
thereof other liabilities
Total equity and liabilities
As originally
reported
Adjustment
IFRS 15
Adjusted
according to
IFRS 15
121,671
2,546
2,327
1,595
66,864
5,087
222
2
226
– 6
1,509
1,509
121,893
2,548
2,553
1,589
68,373
6,596
188,535
1,731
190,266
47,363
47,108
44,445
73,183
5,039
2,795
5,357
67,989
5,879
10,198
– 409
– 409
– 409
– 100
155
26
– 281
2,240
37
2,203
46,954
46,699
44,036
73,083
5,194
2,821
5,076
70,229
5,916
12,401
188,535
1,731
190,266
Group Financial Statements
BMW Group change in presentation of balance sheet at 31 December 2017
• 70
133
in € million
ASSetS
Total non-current assets
thereof investments accounted for using the equity method
thereof deferred tax
thereof other assets
Total current assets
thereof other assets
Total assets
equIty A nd lIAbIlItI eS
Total equity
thereof equity attributable to shareholders of BMW AG
thereof revenue reserves
Total non-current provisions and liabilities
thereof other provisions
thereof deferred tax
thereof other liabilities
Total current provisions and liabilities
thereof other provisions
thereof other liabilities
Total equity and liabilities
As originally
reported
Adjustment
IFRS 15
Adjusted
according to
IFRS 15
121,901
2,767
1,927
1,635
71,582
5,525
63
2
66
– 5
1,960
1,960
121,964
2,769
1,993
1,630
73,542
7,485
193,483
2,023
195,506
54,548
54,112
51,256
69,888
5,437
2,241
5,410
69,047
6,313
10,779
– 441
– 441
– 441
– 254
195
– 84
– 365
2,718
54
2,664
54,107
53,671
50,815
69,634
5,632
2,157
5,045
71,765
6,367
13,443
193,483
2,023
195,506
134
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
bMw Group change in presentation of income statement
for the period 1 January to 31 December 2017
• 71
in € million
Revenues
Cost of sales
Gross profit
Profit / loss before financial result
Profit / loss before tax
Income taxes
Net profit / loss
Attributable to shareholders of BMW AG
Basic earnings per share of common stock in €
Basic earnings per share of preferred stock in €
Diluted earnings per share of common stock in €
Diluted earnings per share of preferred stock in €
bMw Group change in presentation of statement of comprehensive income
for the period 1 January to 31 December 2017
• 72
in € million
Net profit
Total comprehensive income
Total comprehensive income attributable to shareholders of BMW AG
BMW Group change in presentation of cash flow statement
for the period 1 January to 31 December 2017
• 73
in € million
Net profit
Change in provisions
Change in deferred taxes
Other
Cash inflow / outflow from operating activities
The effects of the first-time application of IFRS 15
on equity are shown in the Statement of Changes
in Equity.
As originally
reported
Adjustment
IFRS 15
Adjusted
according to
IFRS 15
98,678
– 78,744
19,934
9,880
10,655
– 1,949
8,706
8,620
13.12
13.14
13.12
13.14
– 396
415
19
19
20
– 51
– 31
– 31
– 0.05
– 0.05
– 0.05
– 0.05
98,282
– 78,329
19,953
9,899
10,675
– 2,000
8,675
8,589
13.07
13.09
13.07
13.09
As originally
reported
Adjustment
IFRS 15
8,706
9,336
9,250
– 31
– 31
– 31
Adjusted
according to
IFRS 15
8,675
9,305
9,219
As originally
reported
Adjustment
IFRS 15
Adjusted
according to
IFRS 15
8,706
696
– 609
– 2,884
5,909
– 31
56
50
– 75
–
8,675
752
– 559
– 2,959
5,909
Group Financial Statements 135
The rules for hedge accounting contained in IAS 39
required an effectiveness test to be performed for
corresponding hedging relationships, based on fixed
ranges, in order to demonstrate the retrospective
effectiveness of the hedge. It was not permitted under
IAS 39 to designate all risk components separately.
The following table shows the reconciliation of the
categories and carrying amounts of financial instru-
ments as well as the impact on Group equity of the
first-time application of IFRS 9.
see
note 4
07
First-time application of IFRS 9
The new requirements contained in IFRS 9 (Finan-
cial Instruments) relating to the classification and
measurement of financial instruments were applied
retrospectively by the BMW Group in the financial
year 2018. The available exemption not to adjust
comparative information for previous periods was
applied. Accordingly, only the opening balance sheet
at 1 January 2018 was adjusted. Apart from a small
number of exceptions, the requirements for hedge
accounting were applied prospectively in the financial
year 2018. The one exception to this is hedge accounting
for the fair value of a portfolio against interest rate
risk, for which the requirements of IAS 39 continue to
be applied. Information on accounting in accordance
with IFRS 9 is provided in the Accounting Policies
section in
note 4.
Prior to the adoption of IFRS 9, financial instruments
were accounted for in accordance with IAS 39. In
accordance with those requirements, the Group’s
financial assets were allocated to either cash funds
or to the categories “loans and receivables”, “available-
for-sale”, “held for trading” or “fair value option”.
Financial liabilities were allocated to the categories
“financial liabilities at fair value through profit or loss”
or “other financial liabilities”. On initial recognition,
financial instruments accounted for in accordance
with IAS 39 were measured at fair value, whereby
transaction costs were taken into account except in the
case of financial instruments allocated to the category
“at fair value through profit or loss”. Subsequent to
initial recognition, available-for-sale financial assets,
held-for-trading financial instruments and financial
assets for which the fair value option was applied
were measured at their fair value. Financial assets
that were classified as loans and receivables and
financial liabilities (with the exception of derivative
financial instruments) were subsequently measured
at amortised cost using the effective interest method.
The IAS 39 impairment model was based on a regular
determination of whether objective evidence indicated
that impairment had already occurred. For the pur-
poses of assessing possible impairment, all available
information, such as market conditions and prices as
well as the length of time and the scale of the decline
in value were taken into account.
136
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
BMW Group reclassification of financial instruments at 1 January 2018
• 74
Category
Carrying amount
Differences through
Equity effects
in € million
IAS 39
IFRS 9
IAS 39
IFRS 9
fInAnCIAl ASSetS
Other investments
Available-for-sale
Fair value option
Fair value through profit or loss
366
29
395
Receivables from sales financing
Loans and receivables
At amortised cost
80,434
80,562
128
– 35
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Hedge accounting
Hedge accounting
Held for trading
Hedge accounting
Hedge accounting
Fair value through profit or loss
Marketable securities and investment funds
Available-for-sale
Fair value through profit or loss
Loans to third parties
Loans and receivables
Fair value directly through equity
At amortised cost
At amortised cost
Fair value option
Fair value through profit or loss
Credit card receivables
Other
Loans and receivables
Loans and receivables
Cash and cash equivalents
Cash
At amortised cost
At amortised cost
At amortised cost
Fair value through profit or loss
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies
in which an investment is held
Collateral assets
Loans and receivables
At amortised cost
Loans and receivables
Loans and receivables
At amortised cost
At amortised cost
Cash
At amortised cost
Available-for-sale
Fair value directly through equity
Other assets
Loans and receivables
At amortised cost
2,187
814
1,340
5,447
112
2
248
184
9,039
2,667
2,187
814
1,340
790
3,919
730
112
2
240
184
8,407
632
2,663
276
276
1,334
1,334
219
97
219
97
1,108
1,108
Total financial assets
fInAnCIAl lIAbIlItIeS
Financial liabilities
Trade payables
Other liabilities
Total financial liabilities
Total impact on equity
105,903
106,011
– 8
116
– 30
– 77
155
Other liabilities
Other liabilities
Other liabilities
At amortised cost
At amortised cost
At amortised cost
94,648
94,618
9,731
6,822
9,731
6,822
111,201
111,171
–
– 30
7
–
23
– 77
178
new
measurement
change of
evaluation
category
measurement
Deferred taxes
Accumulated
other equity
Revenue
reserves
Note
– 8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 8
– 4
– 30
–
–
–
–
–
–
–
–
–
2
–
–
2
–
–
–
1
–
–
–
–
7
–
–
– 76
– 2
– 6
–
–
–
5
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76
–
93
– 5
– 2
– 6
–
–
2
–
–
–
–
–
–
–
–
–
–
– 3
23
–
–
a)
b)
c)
d)
e)
f)
g)
b)
c)
h)
c)
d)
–
–
–
–
fInAnCIAl ASSetS
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other
Cash and cash equivalents
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies
in which an investment is held
Collateral assets
Other assets
Total financial assets
fInAnCIAl lIAbIlItIeS
Financial liabilities
Trade payables
Other liabilities
Total financial liabilities
Total impact on equity
Group Financial Statements
BMW Group reclassification of financial instruments at 1 January 2018
• 74
in € million
IAS 39
IFRS 9
IAS 39
IFRS 9
new
measurement
category
change of
evaluation
measurement
Deferred taxes
Accumulated
other equity
Revenue
reserves
Note
Category
Carrying amount
Differences through
Equity effects
137
Receivables from sales financing
Loans and receivables
At amortised cost
80,434
80,562
Available-for-sale
Fair value option
Fair value through profit or loss
366
29
395
Hedge accounting
Hedge accounting
Held for trading
Hedge accounting
Hedge accounting
Fair value through profit or loss
Marketable securities and investment funds
Available-for-sale
Fair value through profit or loss
Loans to third parties
Loans and receivables
Fair value option
Fair value through profit or loss
Credit card receivables
Other
Loans and receivables
Loans and receivables
Cash and cash equivalents
Cash
Fair value directly through equity
At amortised cost
At amortised cost
At amortised cost
At amortised cost
At amortised cost
Loans and receivables
At amortised cost
Fair value through profit or loss
Loans and receivables
Loans and receivables
At amortised cost
At amortised cost
Cash
At amortised cost
Available-for-sale
Fair value directly through equity
Other assets
Loans and receivables
At amortised cost
2,187
814
1,340
5,447
112
2
248
184
9,039
2,667
2,187
814
1,340
790
3,919
730
112
2
240
184
8,407
632
2,663
276
276
1,334
1,334
219
97
219
97
1,108
1,108
fInAnCIAl ASSetS
Other investments
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies
in which an investment is held
Collateral assets
Total financial assets
fInAnCIAl lIAbIlItIeS
Financial liabilities
Trade payables
Other liabilities
Total financial liabilities
Total impact on equity
–
–
–
–
–
–
–
–
– 8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
128
–
–
–
–
–
–
–
–
– 8
–
–
–
– 4
–
–
–
–
–
–
–
– 35
–
–
–
–
–
2
–
–
2
–
–
–
1
–
–
–
–
– 76
–
–
–
5
–
– 2
2
– 6
–
–
–
–
–
–
–
–
–
–
–
–
–
76
–
93
–
– 5
–
2
– 2
–
–
–
– 6
–
–
–
– 3
–
–
–
–
–
105,903
106,011
– 8
116
– 30
– 77
155
Other liabilities
Other liabilities
Other liabilities
At amortised cost
At amortised cost
At amortised cost
94,648
94,618
9,731
6,822
9,731
6,822
–
–
–
– 30
–
–
7
–
–
–
–
–
23
–
–
111,201
111,171
–
– 30
7
–
23
– 77
178
a)
b)
c)
d)
e)
f)
g)
b)
c)
h)
c)
d)
fInAnCIAl ASSetS
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other
Cash and cash equivalents
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies
in which an investment is held
Collateral assets
Other assets
Total financial assets
fInAnCIAl lIAbIlItIeS
Financial liabilities
Trade payables
Other liabilities
Total financial liabilities
Total impact on equity
138
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
Notes to the
Income Statement
The impact of the various changes arising in con-
junction with the first-time application of IFRS 9 is
explained below:
(f) Adjustment of the amount and presentation of
impairment allowances in accordance with the
new requirements of IFRS 9.
(a) Financial investments in equity instruments were
reclassified to the category “at fair value through
profit or loss”. There was no difference between
carrying amounts pursuant to IAS 39 and fair
values at 1 January 2018.
(b) Selected non-current marketable securities and
loans to third parties, for which the fair value
option available under IAS 39 was previously used,
were reclassified to the category “at fair value
through profit or loss” because their contractual
cash flows do not solely represent payments of
principal and interest on the principal amount
outstanding. There was no difference between
carrying amounts pursuant to IAS 39 and fair
values at 1 January 2018.
(c) Adjustment of impairment allowances in accor-
dance with the new requirements of IFRS 9.
(d) The new accounting requirements for interest rate
hedges reduce the carrying amount of financial
liabilities designated as hedged items within a
hedge relationship by € 30 million and increase
accumulated other equity by € 5 million. At the
date of adoption of the new requirements, rev-
enue reserves increased by € 18 million, after offset
of deferred tax.
(e) Specific investments in debt instruments were
reclassified to the category “at fair value
through profit or loss” because their contractual
cash flows do not solely represent payments
of principal and interest on the principal amount
outstanding.
BMW Group reconciliation of impairment allowances
• 75
in € million
Receivables from sales financing
Credit card receivables
Trade receivables
Marketable securities and investment funds
Total
(g) Specific listed bonds were reclassified to the cat-
egory “at amortised cost”. At the date of first-
time application of IFRS 9, the BMW Group uses
a business model for these bonds, the objective
of which is to collect contractual cash flows that
solely represent payments of principal and interest
on the principal amount outstanding. The market
value of these instruments at 31 December 2018
amounted to € 680 million (31 December 2017:
€ 738 million). If the reclassification to other
comprehensive income had not taken place in
the period under report, a fair value loss of
€ 2 million would have been recognised through
other comprehensive income.
(h) Some of the money market funds with a fixed
net asset value were reclassified from cash to
the category “at fair value through profit or loss”.
They do not meet the criteria for measurement
at amortised cost in accordance with IFRS 9 be-
cause their contractual cash flows do not solely
represent payments of principal and interest on
the principal amount outstanding. There was
no difference between carrying amounts pursuant
to IAS 39 and fair values at 1 January 2018.
The following table shows the adjustments made to
impairment allowances in the Group Balance Sheet as
a result of the first-time application of IFRS 9.
Impairment
allowances
31. 12. 2017
IAS 39
Adjustment to
impairment
allowance due to
IFRS 9
Impairment
allowances
1. 1. 2018
IFRS 9
– 1,147
– 10
– 56
–
128
– 8
– 4
– 2
– 1,019
– 18
– 60
– 2
– 1,213
114
– 1,099
Group Financial Statements NOTES TO THE INCOME
STATEMENT
139
Interest income on loan financing includes interest
calculated on the basis of the effective interest method
totalling € 3,623 million. This interest income is not
reported separately in the income statement as it is
not significant compared to total Group revenues.
08
Revenues
Revenues by activity comprise the following:
09
Cost of sales
Cost of sales comprises:
in € million
2018
2017*
in € million
2018
2017*
Sales of products and related goods
68,194
69,417
Manufacturing costs
43,262
43,442
10,467
10,208
Cost of sales relating to financial services
business
23,383
22,932
Sales of products previously
leased to customers
Income from lease instalments
Interest income on loan financing
Revenues from service contracts,
telematics and roadside assistance
Other income
Revenues
9,691
3,744
1,640
3,744
9,816
3,720
1,737
3,384
97,480
98,282
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
Revenues recognised from contracts with customers
in accordance with IFRS 15 totalled € 82,024 million
(2017: € 82,894 million).
see
note 45
An analysis of revenues by segment is shown in the
note 45. Revenues
segment information provided in
from the sale of products and related goods are gene-
rated primarily in the Automotive segment and, to a
lesser extent, in the Motorcycles segment. Revenues
from sales of products previously leased to customers,
income from lease instalments and interest income on
loan financing are allocated to the Financial Services
segment. Other income relates mainly to the Auto-
motive segment and the Financial Services segment.
The major part of revenues expected to arise from the
Group’s order book at the end of the reporting period
relates to the sale of vehicles. Revenues resulting from
those sales will be recognised in the short term. The
services included in vehicle sale contracts that will be
recognised as revenues in subsequent years represent
only an insignificant portion of expected revenues.
Accordingly, use has been made of the practical
expedient contained in IFRS 15.121, permitting an
entity not to disclose information on a quantitative
basis due to the short-term nature of items and the
lack of informational value of such disclosures.
thereof: Interest expense relating
to financial services business
Research and development expenses
Expenses for service contracts, telematics
and roadside assistance
Warranty expenditure
Other cost of sales
Cost of sales
2,051
5,320
2,234
1,729
2,996
1,801
4,920
2,081
2,097
2,857
78,924
78,329
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
Cost of sales is reduced by public-sector subsidies
in the form of reduced taxes on assets and reduced
consumption-based taxes amounting to € 88 million
(2017: € 61 million).
Expenses for impairment losses for receivables from
sales financing recognised in the income statement
for the financial year 2018 amounted to € 142 million.
Because the impairments are of minor importance
compared to the total Group cost of sales, a separate
disclosure has not been provided in the income
statement.
Research and development expenditure was as follows:
in € million
2018
2017
Research and development expenses
Amortisation
New expenditure for capitalised
development costs
Total research and development
expenditure
5,320
– 1,414
4,920
– 1,236
2,984
2,424
6,890
6,108
140
Notes to the Group
Financial Statements
Notes to the
Income Statement
10
Selling and administrative expenses
Selling and administrative expenses relate mainly to
expenses for marketing, personnel and IT.
11
Other operating income and expenses
Other operating income and expenses comprise the
following items:
in € million
2018
2017
Exchange gains
Income from the reversal of provisions
Income from the reversal of impairment
losses and write-downs
Gains on the disposal of assets
Sundry operating income
Other operating income
Exchange losses
Expense for additions to provisions
Expense for impairment losses and
write-downs
Sundry operating expenses
Other operating expenses
185
216
15
96
262
774
– 135
– 193
– 48
– 275
– 651
282
138
8
80
212
720
– 246
– 580
– 29
– 359
– 1,214
Other operating income and expenses
123
– 494
Income from the reversal of and expenses for the
recognition of impairment allowances and write-
downs relate mainly to impairment allowances on
receivables.
Impairment losses recognised on receivables from
contracts with customers amounted to € 47 million
(2017: € 29 million).
The expense for additions to provisions includes
litigation and other legal risks. Income from the
reversal of provisions includes legal disputes that
have been concluded.
12
Net interest result
in € million
2018
2017
Other interest and similar income
thereof from subsidiaries:
Interest and similar income
Expense relating to interest impact
on other long-term provisions
Net interest expense on the net defined
benefit liability for pension plans
Other interest and similar expenses
thereof subsidiaries:
Interest and similar expenses
397
8
397
201
9
201
– 91
– 66
– 62
– 233
– 2
– 386
– 81
– 265
– 2
– 412
Net interest result
11
– 211
13
Other financial result
in € million
2018
2017
Income from investments in subsidiaries
and participations
thereof from subsidiaries:
Expenses from investments in subsidiaries
and participations
Result on investments
Income (+) and expenses (–) from
financial instruments
Sundry other financial result
Other financial result
278
9
– 122
156
– 105
– 105
51
14
13
–
14
234
234
248
Group Financial Statements
14
Income taxes
Taxes on income of the BMW Group comprise the
following:
in € million
2018
2017*
Current tax expense
Deferred tax expense (+) /
deferred tax income (–)
thereof relating to temporary
differences
thereof relating to tax loss
carryforwards and tax credits
Income taxes
2,220
2,558
355
641
– 286
2,575
– 558
– 502
– 56
2,000
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
Current tax expense includes tax income of € 16 mil-
lion (2017: € 104 million) relating to prior periods.
The tax expense was reduced by € 41 million (2017:
€ 91 million) as a result of utilising tax loss carryfor-
wards, for which deferred assets had not previously
been recognised and in conjunction with previously
unrecognised tax credits and temporary differences.
The tax expense resulting from the change in the
valuation allowance on deferred tax assets relating to
tax losses available for carryforward and temporary dif-
ferences amounted to € 24 million (2017: € 67 million).
Deferred taxes are determined on the basis of tax
rates which are currently applicable or expected to
apply in the relevant national jurisdictions when the
amounts are recovered. After taking account of an
average municipal trade tax multiplier rate (Hebesatz)
of 428.0 % (2017: 425.0 %), the underlying income tax
rate for Germany was as follows:
in %
2018
2017
Corporate tax rate
Solidarity surcharge
Corporate tax rate including solidarity
surcharge
Municipal trade tax rate
German income tax rate
15.0
5.5
15.8
15.0
30.8
15.0
5.5
15.8
14.9
30.7
Deferred taxes for non-German entities are calcu-
lated on the basis of the relevant country-specific tax
rates. These range in the financial year 2018 between
9.0 % and 45.0 % (2017: between 9.0 % and 45.0 %).
141
Changes in tax rates resulted in a deferred tax
expense of € 90 million (2017: deferred tax income
of € 796 million). The principal reason for this devel-
opment in the previous year was the reduction in
the US federal corporate income tax rate from 35.0 %
to 21.0 % with effect from 1 January 2018.
The difference between the expected tax expense
based on the underlying tax rate for Germany and
actual tax expense is explained in the following
reconciliation:
in € million
2018
2017*
Profit before tax
Tax rate applicable in Germany
Expected tax expense
9,815
30.8 %
3,023
10,675
30.7 %
3,277
Variances due to different tax rates
– 359
– 1,026
Tax increases (+) / tax reductions (–) as a
result of non-deductible expenses and
tax-exempt income
Tax expense (+) / benefits (–) for prior
years
Other variances
Actual tax expense
Effective tax rate
141
58
– 16
– 214
2,575
26.2 %
– 104
– 205
2,000
18.7 %
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
In the previous year, variances due to different tax
rates were influenced in particular by the reduction
in the US federal corporate income tax rate, which
was required to be taken into account in the mea-
surement of deferred taxes as of 31 December 2017.
This resulted in a reduction in the tax expense of
€ 977 million.
Tax increases as a result of non-deductible expenses
and tax reductions due to tax-exempt income
increased compared to one year earlier. As in the
previous year, tax increases as a result of non-tax-
deductible expenses were attributable primarily to
the impact of non-recoverable withholding taxes and
transfer price issues.
Tax income relating to prior years resulted primarily
from adjustments to income tax receivables and pro-
visions for prior years.
Other variances comprise various reconciling items,
including the Group’s share of earnings of companies
accounted for using the equity method.
142
Notes to the Group
Financial Statements
Notes to the
Income Statement
The allocation of deferred tax assets and liabilities to
balance sheet line items at 31 December is shown in
the following table:
in € million
Intangible assets
Property, plant and equipment
Leased products
Other investments
Sundry other assets
Tax loss carryforwards and capital losses
Provisions
Liabilities
Eliminations
Valuation allowances on tax loss carryforwards and capital losses
Netting
Deferred taxes
Net
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
Deferred tax assets
Deferred tax liabilities
2018
2017*
2018
2017*
22
171
487
3
1,185
891
5,323
2,570
3,180
18
88
473
3
613
608
5,192
2,415
3,222
3,077
359
5,210
20
3,254
–
29
620
981
2,593
195
4,655
10
3,629
–
78
428
706
13,832
12,632
13,550
12,294
– 498
– 11,744
1,590
–
– 502
– 10,137
1,993
–
–
–
– 11,744
– 10,137
1,806
216
2,157
164
Tax loss carryforwards – for the most part usable
without restriction – amounted to € 2,045 million
(2017: € 928 million). This includes an amount of
€ 542 million (2017: € 548 million), for which a valu-
ation allowance of € 185 million (2017: € 186 million)
was recognised on the related deferred tax asset. For
entities with tax losses available for carryforward,
a net surplus of deferred tax assets over deferred
tax liabilities is reported at 31 December 2018
amounting to € 234 million (2017: € 131 million).
Deferred tax assets are recognised on the basis of
management’s assessment that there is material
evidence that the entities will generate future tax-
able profits, against which deductible temporary
differences can be offset.
Capital losses available for carryforward in the United
Kingdom which do not relate to ongoing operations
decreased to € 1,841 million (2017: € 1,854 million) due
to currency factors. As in previous years, deferred tax
assets recognised on these tax losses – amounting to
€ 313 million at the end of the reporting period (2017:
€ 315 million) – were fully written down since they can
only be utilised against future capital gains.
Netting relates to the offset of deferred tax assets
and liabilities within individual entities or tax
groups to the extent that they relate to the same
tax authorities.
Deferred taxes recognised directly in equity amounted
to € 1,457 million (2017: € 1,000 million).
Changes in deferred tax assets and liabilities
during the reporting period can be summarised
as follows:
in € million
20181
20172
Deferred taxes at 1 January (assets (–) / liabilities (+))
Deferred tax expense (+) / income (–) recognised through income statement
Change in deferred taxes recognised directly in equity
thereof relating to fair value gains and losses on financial instruments and marketable securities recognised directly in equity
thereof relating to the remeasurements of net liabilities for defined benefit pension plans
thereof from currency translation
Exchange rate impact and other changes
Deferred taxes at 31 December (assets (–) / liabilities (+))
1 The figures at 1.1.2018 adjusted due to first-time application of IFRS 9, see note 7.
2 Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
201
355
– 457
– 677
222
– 2
117
216
268
– 558
815
591
181
43
– 361
164
Group Financial Statements Deferred taxes are not recognised on retained profits
of € 48.2 billion (2017: € 42.8 billion) of foreign sub-
sidiaries, as it is intended to invest these profits to
maintain and expand the business volume of the
relevant companies. No computation was made of
the potential impact of income taxes on the grounds
of proportionality.
The tax returns of BMW Group entities are checked
regularly by German and foreign tax authorities. Taking
account of numerous factors – including interpretations,
commentaries and legal decisions relating to the various
tax jurisdictions as well as past experience – adequate
provision has been made, to the extent identifiable and
probable, for potential future tax obligations.
143
15
Earnings per share
Net profit attributable to the shareholders of BMW AG
€ million
7,117.4
8,589.0
2018
20171
Profit attributable to common stock
Profit attributable to preferred stock
Average number of common stock shares in circulation
Average number of preferred stock shares in circulation
Basic / diluted earnings per share of common stock
Basic / diluted earnings per share of preferred stock
Dividend per share of common stock
Dividend per share of preferred stock
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
2 Proposal by management.
Earnings per share of preferred stock are computed
on the basis of the number of preferred stock shares
entitled to receive a dividend in each of the relevant
financial years. As in the previous year, diluted earn-
ings per share correspond to basic earnings per share.
Basic / diluted earnings per share from continuing
operations amounted to € 10.87 per share of common
stock and € 10.89 per share of preferred stock.
€ million
€ million
6,514.5
602.9
7,867.6
721.4
number
601,995,196
601,995,196
number
55,605,380
55,114,290
€
€
€
€
10.82
10.84
3.50 2
3.52 2
13.07
13.09
4.00
4.02
16
Personnel expenses
The income statement includes personnel expenses
as follows:
in € million
2018
2017*
Wages and salaries
Pension and welfare expenses
Social insurance expenses
Personnel expenses
10,249
1,387
843
9,938
1,295
819
12,479
12,052
* Distribution to wages and salaries and pension and welfare expenses adjusted in previous
year figures.
Personnel expenses include € 45 million (2017:
€ 54 million) of costs relating to workforce measures.
The total pension expense for defined contribution
plans of the BMW Group amounted to € 122 million
(2017: € 105 million). Employer contributions paid to
state pension insurance schemes totalled € 645 million
(2017: € 630 million).
and, in accordance with current requirements, all
work related thereto, including the review of the
Group Interim Financial Statements.
Other attestation services include mainly project-
related audits, comfort letters as well as legally
prescribed, contractually agreed or voluntarily
commissioned attestation work.
Tax advisory services were performed particularly in
conjunction with tax compliance.
Other services include mainly IT consulting, bench-
mark analyses as well as advisory work relating to
production processes.
18
Government grants and government assistance
Income from asset-related and performance-related
grants, amounting to € 29 million (2017: € 30 million)
and € 83 million (2017: € 112 million) respectively, was
recognised in the income statement in 2018.
These amounts relate mainly to public sector grants
aimed at the promotion of regional structures as well
as to subsidies received for plant expansions.
144
Notes to the Group
Financial Statements
Notes to the
Income Statement
Notes to the
Statement of
Comprehensive
Income
The average number of employees during the year was:
2018
2017
Employees
123,337
119,611
thereof at
proportionately-consolidated entities
Apprentices and students gaining work
experience
thereof at
proportionately-consolidated entities
–
182
8,228
7,913
–
1
Average number of employees
131,565
127,524
The number of employees at the end of the reporting
period is disclosed in the Combined Management
Report.
17
Fee expense for the Group auditor
The fee expense pursuant to § 314 (1) no. 9 HGB
recognised in the financial year 2018 for the Group
auditor and its network of audit firms amounted to
€ 24 million (2017: € 25 million) and consists of the
following:
in € million
2018
2017
Audit of financial statements
17
17
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
Other attestation services
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
Tax advisory services
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
Other services
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
Fee expense
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
5
3
2
2
–
2
–
24
7
5
4
3
2
–
2
1
25
9
Services provided by KPMG AG Wirtschaftsprüfungs-
gesellschaft, Berlin, during the financial year 2018 on
behalf of BMW AG and subsidiaries under its control
relate to the audit of the financial statements, other
attestation services, tax advisory services and other
services.
The audit of financial statements comprises mainly the
audit of the Group financial statements and Company
financial statements of BMW AG and its subsidiaries,
Group Financial Statements
145
NOTES TO THE STATEMENT
OF COMPREHENSIVE
INCOME
19
Disclosures relating to the statement of
comprehensive income
Other comprehensive income for the period after tax
comprises the following:
in € million
2018
2017
Remeasurement of the net defined benefit liability for pension plans
Deferred taxes
Items not expected to be reclassified to the income statement in the future
Marketable securities (at fair value through other comprehensive income)
thereof gains / losses arising in the period under report
thereof reclassifications to the income statement
Financial instruments used for hedging purposes
thereof gains / losses arising in the period under report
thereof reclassifications to the income statement
Costs of hedging
thereof gains / losses arising in the period under report
thereof reclassifications to the income statement
Other comprehensive income from equity accounted investments
Deferred taxes
Currency translation foreign operations
Items that can be reclassified to the income statement in the future
Other comprehensive income for the period after tax
Deferred taxes on components of other comprehen-
sive income are as follows:
935
– 217
718
– 30
– 1
– 29
– 1,381
– 333
– 1,048
– 620
– 973
353
– 157
674
192
– 1,322
– 604
693
– 218
475
39
83
– 44
1,914
2,017
– 103
–
–
–
– 30
– 597
– 1,171
155
630
in € million
2018
2017
Before
tax
Deferred
taxes
After
tax
Before
tax
Deferred
taxes
After
tax
Remeasurement of the net defined benefit liability for pension plans
Marketable securities (at fair value through other comprehensive income)
Financial instruments used for hedging purposes
Costs of hedging
Other comprehensive income from equity accounted investments
Currency translation foreign operations
Other comprehensive income
935
– 30
– 1,381
– 620
– 157
192
– 1,061
– 217
18
436
187
33
–
457
718
– 12
– 945
– 433
– 124
192
– 604
693
39
1,914
–
– 30
– 1,171
1,445
– 218
2
– 568
–
– 31
–
– 815
475
41
1,346
–
– 61
– 1,171
630
Other comprehensive income arising from equity
accounted investments is reported in the State-
ment of Changes in Equity within currency trans-
lation differences with an amount of € – 24 million
(2017: € – 152 million), within financial instruments
used for hedging purposes with an amount of € 39 mil-
lion (2017: € 91 million) and within costs of hedging
with an amount of € – 139 million (2017: € – million).
146
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
NOTES TO THE BALANCE SHEET
20
Analysis of changes in Group tangible, intangible and investment assets 2018
Acquisition and manufacturing cost
Depreciation and amortisation
Carrying amount
1. 1. 2018
Translation
differences
Additions
Reclassi-
fications
Disposals
31. 12. 2018
1. 1. 2018
Current year
adjustments2
Disposals
31. 12. 2018
31. 12. 2018
31. 12. 2017
Translation
differences
Reclas si-
fications
Value
in € million
Development costs
Goodwill
Other intangible assets
Intangible assets
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
Other facilities, factory and office equipment
Advance payments made and construction in progress
Property, plant and equipment
12,965
385
1,750
15,100
11,088
36,833
2,799
2,525
53,245
–
–
12
12
75
201
20
18
314
2,984
–
161
3,145
277
2,888
294
1,409
4,868
Leased products
44,143
735
18,421
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
1 Including assets under construction of € 2,017 million.
2 Including € 74 million recognised through the income statement
2,769
438
820
28
–
3
9
–
1,286
12
547
8
115
–
123
Analysis of changes in Group tangible, intangible and investment assets 2017
in € million
Development costs
Goodwill
Other intangible assets
Intangible assets
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
Other facilities, factory and office equipment
11,484
386
1,530
13,400
10,940
35,924
2,674
–
– 1
– 37
– 38
– 299
– 681
– 91
2,424
–
286
2,710
271
2,123
314
1,694
4,402
Advance payments made and construction in progress
Property, plant and equipment
2,255
– 97
51,793
– 1,168
Leased products
45,595
– 3,047
18,281
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
1 Including first-time consolidation and changes in accordance with IFRS 15.
2 Including assets under construction of € 2,010 million.
3 Including € 3 million recognised through the income statement and € 76 million directly in equity.
2,548
–
639
501
710
28
1,239
– 8
– 7
–
– 15
74
118
–
192
–
–
–
–
959
–
125
14,990
385
1,798
1,084
17,173
372
1,119
60
82
2,852
183
11,730
38,189
2,990
– 1,551
6
2,395
–
–
–
–
–
–
–
3,123
55,304
16,956
46,343
692
2,624
5
6
–
444
938
28
11
1,410
–
–
–
–
228
1,027
70
943
–
29
972
52
1,560
168
12,965
385
1,750
15,100
11,088
36,833
2,799
– 1,325
2
2,525
–
–
–
–
–
–
–
1,782
53,245
16,686
44,143
418
2,769
129
1
–
438
820
28
130
1,286
4,556
5
1,075
5,636
4,966
27,838
1,970
34,774
7,886
–
–
189
408
– 1
596
4,263
5
928
5,196
4,786
27,092
1,952
–
–
192
484
2
678
–
–
5
5
29
154
17
–
200
113
–
2
–
1
– 1
–
–
– 16
– 16
– 115
– 531
– 62
–
–
–
–
– 3
– 3
1,414
–
195
1,609
348
2,886
270
3,504
3,328
1,236
–
191
1,427
337
2,820
238
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
– 5
73
–
1
74
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 76
– 3
– 79
–
–
–
–
–
–
–
–
–
–
–
–
956
–
92
1,048
33
2,767
175
5,014
9,976
8,409
5
1,183
6,202
380
615
380
675
10,971
9,464
Development costs
Goodwill
Other intangible assets
Intangible assets
5,310
6,420
28,111
10,078
6,122
8,995
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
2,082
908
829 Other facilities, factory and office equipment
–
2,395 1
2,525
Advance payments made and
construction in progress
2,975
35,503
19,801
18,471
Property, plant and equipment
3,556
7,771
38,572
36,257
Leased products
–
2,624
2,769
Investments accounted for using
the equity method
191
480
–
671
253
458
28
739
249
412
29
690
Investments in non-consolidated
subsidiaries
Participations
Non-current marketable securities
Other investments
943
–
28
971
37
1,548
158
5
1,075
5,636
4,966
27,838
1,970
4,556
8,409
7,221
Development costs
380
675
364
572
9,464
8,157
Goodwill
Other intangible assets
Intangible assets
6,122
8,995
829
6,154
8,832
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
721 Other facilities, factory and office equipment
–
2,525 2
2,253
Advance payments made and
construction in progress
–
2,769
2,546
Investments accounted for using
the equity method
189
408
– 1
596
249
412
29
690
308
226
26
560
Investments in non-consolidated
subsidiaries
Participations
Non-current marketable securities
Other investments
33,830
– 708
3,395
1,743
34,774
18,471
17,960
Property, plant and equipment
7,801
– 379
3,633
3,169
7,886
36,257
37,789
Leased products
Acquisition and manufacturing cost
Depreciation and amortisation
Carrying amount
1. 1. 2017 1
Translation
differences
Additions
Reclassi-
fications
Disposals
31. 12. 2017
1. 1. 2017 1
Current year
adjustments3
Disposals
31. 12. 2017
31. 12. 2017
31. 12. 2016
Translation
differences
Reclas si-
fications
Value
Group Financial Statements
Acquisition and manufacturing cost
Depreciation and amortisation
Carrying amount
1. 1. 2018
Additions
Disposals
31. 12. 2018
Translation
differences
Reclassi-
fications
1. 1. 2018
Translation
differences
Current year
Reclas si-
fications
Value
adjustments2
Disposals
31. 12. 2018
31. 12. 2018
31. 12. 2017
147
4,556
5
1,075
5,636
4,966
27,838
1,970
–
34,774
7,886
–
189
408
– 1
596
–
–
5
5
29
154
17
–
200
113
–
2
– 1
–
1
1,414
–
195
1,609
348
2,886
270
–
3,504
3,328
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
73
1
74
956
–
92
1,048
33
2,767
175
5,014
9,976
8,409
5
1,183
6,202
380
615
380
675
10,971
9,464
Development costs
Goodwill
Other intangible assets
Intangible assets
5,310
6,420
28,111
10,078
6,122
8,995
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
2,082
908
829 Other facilities, factory and office equipment
–
–
2,395 1
2,525
Advance payments made and
construction in progress
2,975
35,503
19,801
18,471
Property, plant and equipment
3,556
7,771
38,572
36,257
Leased products
–
–
–
–
–
–
2,624
2,769
Investments accounted for using
the equity method
191
480
–
671
253
458
28
739
249
412
29
690
Investments in non-consolidated
subsidiaries
Participations
Non-current marketable securities
Other investments
Acquisition and manufacturing cost
Depreciation and amortisation
Carrying amount
1. 1. 2017 1
Additions
Disposals
31. 12. 2017
Translation
differences
Reclassi-
fications
1. 1. 2017 1
Translation
differences
Current year
Reclas si-
fications
Value
adjustments3
Disposals
31. 12. 2017
31. 12. 2017
31. 12. 2016
4,263
5
928
5,196
4,786
27,092
1,952
–
–
– 16
– 16
– 115
– 531
– 62
1,236
–
191
1,427
337
2,820
238
–
–
–
33,830
– 708
3,395
Leased products
45,595
– 3,047
18,281
16,686
44,143
7,801
– 379
3,633
2,548
–
639
418
2,769
501
710
28
1,239
– 8
– 7
–
– 15
74
118
–
192
129
1
–
438
820
28
130
1,286
–
192
484
2
678
–
– 3
–
–
– 3
–
–
–
–
–
1 Including first-time consolidation and changes in accordance with IFRS 15.
2 Including assets under construction of € 2,010 million.
3 Including € 3 million recognised through the income statement and € 76 million directly in equity.
–
–
–
–
– 5
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 76
– 3
– 79
943
–
28
971
37
1,548
158
4,556
8,409
7,221
Development costs
5
1,075
5,636
4,966
27,838
1,970
380
675
364
572
9,464
8,157
Goodwill
Other intangible assets
Intangible assets
6,122
8,995
829
6,154
8,832
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
721 Other facilities, factory and office equipment
–
–
2,525 2
2,253
Advance payments made and
construction in progress
1,743
34,774
18,471
17,960
Property, plant and equipment
3,169
7,886
36,257
37,789
Leased products
–
–
–
–
–
–
2,769
2,546
Investments accounted for using
the equity method
189
408
– 1
596
249
412
29
690
308
226
26
560
Investments in non-consolidated
subsidiaries
Participations
Non-current marketable securities
Other investments
Leased products
44,143
735
18,421
16,956
46,343
in € million
Development costs
Goodwill
Other intangible assets
Intangible assets
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
Other facilities, factory and office equipment
Advance payments made and construction in progress
Property, plant and equipment
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
1 Including assets under construction of € 2,017 million.
2 Including € 74 million recognised through the income statement
in € million
Development costs
Goodwill
Other intangible assets
Intangible assets
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
Other facilities, factory and office equipment
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
12,965
385
1,750
15,100
11,088
36,833
2,799
2,525
53,245
2,769
438
820
28
11,484
386
1,530
13,400
10,940
35,924
2,674
–
–
12
12
75
201
20
18
314
–
3
9
–
–
– 1
– 37
– 38
– 299
– 681
– 91
959
–
125
14,990
385
1,798
1,084
17,173
372
1,119
60
82
2,852
183
11,730
38,189
2,990
– 1,551
6
2,395
3,123
55,304
692
2,624
5
6
–
444
938
28
943
–
29
972
52
1,560
168
12,965
385
1,750
15,100
11,088
36,833
2,799
228
1,027
70
2,984
–
161
3,145
277
2,888
294
1,409
4,868
547
115
8
–
123
2,424
–
286
2,710
271
2,123
314
1,694
4,402
1,286
12
11
1,410
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Advance payments made and construction in progress
Property, plant and equipment
2,255
– 97
51,793
– 1,168
– 1,325
2
2,525
1,782
53,245
148
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
21
Intangible assets
Intangible assets mainly comprise capitalised devel-
opment costs on vehicle, module and architecture
projects as well as subsidies for tool costs, licences,
purchased development projects, software and pur-
chased customer lists.
Other intangible assets include a brand-name right
amounting to € 41 million (2017: € 41 million) which
is allocated to the Automotive segment and is not
subject to scheduled amortisation since its useful life is
deemed to be indefinite. Intangible assets also include
goodwill of € 33 million (2017: € 33 million) allocated
to the Automotive cash-generating unit (CGU) and
goodwill of € 347 million (2017: € 347 million) allocated
to the Financial Services CGU.
Intangible assets amounting to € 41 million (2017:
€ 41 million) are subject to restrictions on title.
As in the previous year, there was no requirement to
recognise impairment losses or reversals of impair-
ment losses on intangible assets in 2018.
As in the previous year, no financing costs were recog-
nised as a cost component of intangible assets in 2018.
22
Property, plant and equipment
No impairment losses were recognised in 2018, as in
the previous year.
As in the previous year, no financing costs were
recog nised as a cost component of property, plant
and equipment in 2018.
Property, plant and equipment include a total of
€ 89 million (2017: € 94 million) relating to land and
buildings, for which economic ownership is attribut-
able to the BMW Group (finance leases). The principal
leases are held by BMW AG, have a carrying amount
of € 70 million (2017: € 78 million) and run for peri-
ods up to 2030 at the latest. The leases contain price
adjustment clauses in the form of index-linked rentals
as well as extension and purchase options.
Minimum lease payments are as follows:
in € million
31. 12. 2018
31. 12. 2017
Total of future minimum lease payments
due within one year
due between one and five years
due later than five years
Interest portion of the future minimum
lease payments
due within one year
due between one and five years
due later than five years
Present value of future minimum lease
payments
due within one year
due between one and five years
due later than five years
18
75
85
178
9
26
38
73
9
49
47
105
19
73
100
192
10
32
40
82
9
41
60
110
23
Leased products
Minimum lease payments of non-cancellable oper-
ating leases amounting to € 18,880 million (2017:
€ 17,982 million) fall due as follows:
in € million
31. 12. 2018
31. 12. 2017
within one year
between one and five years
later than five years
8,980
9,863
37
8,586
9,383
13
Minimum lease payments
18,880
17,982
Contingent rents of € 92 million (2017: € 52 million),
based principally on the distance driven, were
recog nised in income. The agreements have, in part,
extension and purchase options.
Impairment losses amounting to € 235 million (2017:
€ 148 million) were recognised on leased products in
2018 as a consequence of changes in residual value
expectations. Income from the reversal of impairment
losses amounted to € 92 million (2017: € – million).
Group Financial Statements
149
electric vehicles in Europe. The plan is to build some
400 fast-charging stations by 2020 in order to support
electric mobility on long-haul routes and thereby
establish the market.
In the financial year 2015, BMW AG, Daimler AG and
AUDI AG, Ingolstadt (Audi AG) jointly acquired the
mapping and location-based services business (HERE
Group) of Nokia Corporation, Helsinki. HERE’s
digital maps are laying the foundations for the next
generation of mobility and location-based services,
providing the basis for new assistance systems and,
ultimately, fully automated driving.
In December 2016, THERE signed contracts relating
to the sale of shares in HERE International B. V.,
Amsterdam (HERE). The sale of 15 % of the shares to
Intel Holdings B. V., Schiphol-Rijk, was completed in
January 2017. The sale of the shares resulted in a loss
of control, as defined by IFRS 10, at the level of THERE.
Since THERE continues to have a significant influence
over HERE, the latter has been included since then
in THERE’s consolidated financial statements as an
associated company using the equity method. The
loss of control and the subsequent deconsolidation of
HERE and its subsidiaries led to a positive earnings
effect at the level of THERE. The BMW Group portion
amounted to € 183 million, which was recognised in
the result from equity accounted investments in the
financial year 2017.
In December 2017, BMW AG, Audi AG and Daimler AG
signed contracts for the sale of shares in THERE. Stakes
of 5.9 % each were sold to Robert Bosch Investment
Nederland B. V., Boxtel, and Continental Automotive
Holding Netherlands B. V., Maastricht, whereby the
sale was executed in equal parts by BMW AG, Audi AG
and Daimler AG. Closure of these transactions did
not have a significant effect on earnings in the finan-
cial year 2018.
Capital increases were made at the level of THERE in
June and November 2018, with BMW AG participating
with an amount of € 31 million on each occasion. As a
result, BMW AG’s stake in THERE increased in steps
by 0.2 % to 29.6 %.
24
Investments accounted for using the equity method
Investments accounted for using the equity method com-
prise the joint venture BMW Brilliance Automotive Ltd.
(BMW Brilliance), until 9 March 2018 the joint ven-
tures DriveNow GmbH & Co. KG and DriveNow
Verwaltungs GmbH (DriveNow), the joint venture
IONITY Holding GmbH & Co. KG (IONITY) and the
interest in the associated company THERE Holding
B. V. (THERE).
BMW Brilliance produces mainly BMW brand models
for the Chinese market and also has engine manu-
facturing facilities, which supply the joint venture’s
two plants with petrol engines.
The BMW Group intends to increase its stake in
the BMW Brilliance joint venture from 50 % to 75 %.
On 11 October 2018, the BMW Group signed an
agreement with its joint venture partner, a wholly
owned subsidiary of Brilliance China Automotive
Holdings Ltd. (CBA), to acquire an additional 25 %
shareholding in BMW Brilliance. The two partners
agreed on a purchase price of an equivalent of € 3.6 bil-
lion. The contractual term of the joint venture, which
would currently expire in 2028, is to be extended
to 2040 as part of the agreement. The prerequisite
for the extension is the acquisition of the additional
shares as agreed. The agreement was approved at
the CBA shareholders’ meeting on 18 January 2019
and remains subject to the approval of the relevant
authorities. The transaction is scheduled to close
in 2022. The closing will result in BMW Brilliance
being fully consolidated in the BMW Group Financial
Statements and is expected to result in the recognition
of a significant valuation gain in the financial year in
which the transaction closes.
The BMW Group previously maintained the joint
ventures DriveNow GmbH & Co. KG and DriveNow
Vewaltungs GmbH together with Sixt SE, Pullach.
DriveNow offers car-sharing services in major German
cities and abroad. Following approval by the antitrust
authorities and with effect from 9 March 2018, the
agreement with SIXT regarding the full acquisition
of shares in DriveNow by the BMW Group was com-
pleted. The total valuation for DriveNow amounts
to € 418 million. Further information relating to this
note 2 to the Group
transaction is provided in
Financial Statements.
see
note 2
In the financial year 2017, the BMW Group,
Daimler AG, Stuttgart (Daimler AG), the Ford
Motor Company and the Volkswagen Group, each
with equal shareholdings, founded the joint venture
IONITY Holding GmbH & Co. KG. IONITY’s business
model envisages the construction and operation of
high- performance charging stations for battery
150
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Financial information relating to equity accounted
investments is summarised in the following tables:
in € million
2018
20171
2018
2017
2018
2017
2018
2017
BMW Brilliance
THERE
DriveNow
IONITY
dISCloSureS relAtInG to
the InCoMe S tAteMent
Revenues
Scheduled depreciation
Profit / loss before financial result
Interest income
Interest expenses
Income taxes
Profit / loss after tax
thereof from continuing operations
thereof from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received by the Group
17,766
14,627
636
1,922
62
–
535
1,561
1,561
–
– 250
1,311
384
637
1,620
46
–
454
1,338
1,338
–
– 121
1,217
258
–
–
– 1
–
–
–
– 337
– 337
–
– 7
– 344
–
71 2
–
– 1
–
–
–
362
– 151
513
2
364
–
14
–
– 6
–
–
–
– 6
–
–
–
– 6
–
71
–
– 17
–
–
–
–
1
– 18
–
–
3
–
–
– 12
–
–
2
– 17
– 15
– 10
–
–
–
– 17
–
–
–
–
– 15
–
–
–
–
– 10
–
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
2 Revenues relate only to the month of January up to the time of loss of control of HERE.
in € million
2018
20171
2018
2017
2018
2017
2018
2017
BMW Brilliance
THERE
DriveNow
IONITY
dISCloSureS relAtInG to
the bAlAnCe Sheet
Non-current assets
Current assets
thereof cash and cash equivalents
Equity
Non-current financial liabilities
Non-current provisions and liabilities
Current provisions and liabilities
thereof current financial liabilities
reConCIlIAtIon of
AGGreGAted fInAnCIAl
InforMAtIon
Assets
Provisions and liabilities
Net assets
Group’s interest in net assets
Eliminations
Carrying amount
6,714
6,570
2,937
5,926
71
1,193
6,094
81
5,910
5,211
2,617
5,382
–
960
4,779
6
1,763
2
2
1,764
–
–
1
–
13,284
11,121
1,765
7,358
5,926
2,963
– 898
2,065
5,739
5,382
2,691
– 666
2,025
1
1,764
522
–
522
1,906
289
289
2,195
–
–
–
–
2,195
–
2,195
732
–
732
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26
9
4 2
–
–
22
–
26
22
4
2 3
–
2
48
110
102
149
–
3
6
–
158
9
149
37
–
37
4
46
45
40
–
–
10
–
50
10
40
10
–
10
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
2 Corresponds to the consolidated equity capital provided by the shareholders of DriveNow GmbH & Co. KG and its subsidiaries.
3 The share of the BMW Group on net assets at 31 December 2017 amounted to 52.8 %. Due to the allocation of voting power within decision-making bodies of the two entities,
operations remain subject to joint control.
Group Financial Statements 151
25
Receivables from sales financing
Receivables from sales financing comprise the fol-
lowing:
in € million
31. 12. 2018
31. 12. 2017
Credit financing for retail customers
and dealerships
Finance lease receivables
Receivables from
sales financing
66,521
20,262
62,401
18,033
86,783
80,434
Unguaranteed residual values amount to € 1,392 mil-
lion (2017: € 1,240 million *).
* Prior year figure
has been adjusted.
Impairment allowances on receivables from sales
financing in accordance with IFRS 9, which only arise
within the Financial Services segment, developed in
the financial year 2018 as follows:
in Mio. €
General
Simplified
Stage 1
Stage 2
Stage 3
Impairment allowances at 1 January 2018
Reclassification to Stage 1
Reclassification to Stage 2
Reclassification to Stage 3
Derecognition and origination of receivables
Write off of receivables
Changes in risk parameters
Other changes
Impairment allowances at 31 December 2018
365
3
– 7
– 4
59
– 3
4
– 54
363
192
– 20
79
– 23
– 10
– 20
1
– 24
175
12
–
–
– 1
1
– 1
– 1
2
12
450
– 4
– 21
138
– 17
– 105
26
15
482
Total
1,019
– 21
51
110
33
– 129
30
– 61
1,032
The impairment allowances according to IAS 39 in the
financial year 2017 developed as follows:
Finance leases are analysed as follows:
in € million
31. 12. 2018
31. 12. 2017
in € million
specific
item basis
group basis
Total
Impairment allowances
at 1 January 2017
Allocated (+) / reversed (–)
Utilised
Exchange rate impact
and other changes
Impairment allowances
at 31 December 2017
943
143
– 337
– 48
701
469
2
– 8
– 17
446
1,412
145
– 345
– 65
1,147
Impairment allowances include € 113 million (2017:
€ 105 million) on credit-impaired receivables relating
to finance leases.
The estimated fair value of vehicles held as collateral
for credit-impaired receivables at the end of the
reporting period totalled € 506 million. The carrying
amount of assets held as collateral and taken back as
a result of payment default amounted to € 42 million
(2017: € 45 million).
Gross investment in finance leases
due within one year
due between one and five years
due later than five years
Present value of future minimum
lease payments
due within one year
due between one and five years
due later than five years
6,811
15,480
24
6,122
13,772
21
22,315
19,915
6,238
14,001
23
5,655
12,358
20
20,262
18,033
Unrealised interest income
2,053
1,882
152
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
26
Financial assets
Financial assets comprise:
Allowances for impairment and credit risk
Receivables relating to credit card business comprise
the following:
in € million
31. 12. 2018
31. 12. 2017
in € million
31. 12. 2018
31. 12. 2017
Marketable securities and
investment funds
Derivative instruments
Credit card receivables
Loans to third parties
Other
Financial assets
thereof non-current
thereof current
5,316
1,977
244
20
128
5,447
4,341
248
114
184
7,685
10,334
1,010
6,675
2,369
7,965
Marketable securities and investment funds relate to
available-for-sale financial assets and comprise:
in € million
31. 12. 2018
31. 12. 2017
Fixed income securities
Stocks and other equity
capital instruments
Other debt securities
Marketable securities and
investment funds
4,359
4,662
–
957
534
251
5,316
5,447
In 2017, stocks and other equity capital instruments
related entirely to investment funds. In accordance
with IFRS 9, these assets are required to be classified
as debt capital instruments and are therefore reported
as other debt securities with effect from the financial
year 2018.
The contracted maturities of debt securities are as
follows:
in € million
31. 12. 2018
31. 12. 2017
Fixed income securities
due within three months
due later than three months
Other debt securities
due within three months
due later than three months
Debt securities
787
3,572
628
4,034
957
–
251
–
5,316
4,913
Gross carrying amount
Allowance for impairment
Net carrying amount
262
– 18
244
258
– 10
248
27
Income tax assets
Income tax assets totalling € 1,366 million (2017:
€ 1,566 million) include claims amounting to € 222 mil-
lion (2017: € 364 million), which are expected to
be settled after more than one year. Claims may be
settled earlier than this depending on the timing of
proceedings.
28
Other assets
Other assets comprise:
in € million
31. 12. 2018
31. 12. 2017*
Return right assets for future
leased products
Prepayments
Receivables from companies in which
an investment is held
Other taxes
Receivables from subsidiaries
Collateral assets
Expected reimbursement claims
Sundry other assets
Other assets
thereof non-current
thereof current
3,261
2,167
1,916
1,747
295
293
933
1,204
11,816
2,026
9,790
1,962
2,018
1,334
1,537
276
316
847
825
9,115
1,630
7,485
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
Prepayments relate mainly to prepaid interest, com-
mission paid to dealerships and amounts paid in
advance to contract manufacturers. Prepayments of
€ 1,227 million (2017: € 1,136 million) have a maturity
of less than one year.
Group Financial Statements
Collateral assets comprise mainly customary collateral
(banking deposits) arising on the sale of receivables.
Impairment allowances on trade receivables according
to IFRS 9 developed during the financial year 2018
as follows:
153
29
Inventories
Inventories comprise the following:
in € million
31. 12. 2018
31. 12. 2017
Finished goods and goods for resale
10,592
10,436
Work in progress, unbilled contracts
Raw materials and supplies
Inventories
1,208
1,247
1,125
1,146
13,047
12,707
Out of the total amount recognised for inventories
at 31 December 2018, inventories measured at net
realisable value amounted to € 680 million (2017:
€ 673 million 1). Write-downs to net realisable value
amounting to € 54 million (2017: € 36 million 1) were
recognised in 2018, reversal of impairment losses
amounted to € 22 million (2017: € 6 million).
1 Prior year figure
has been adjusted.
The expense recorded in conjunction with inven-
tories during the financial year 2018 amounted to
€ 58,079 million (2017: € 55,969 million).
30
Trade receivables
Trade receivables comprise the following:
in € million
31. 12. 2018
31. 12. 2017
Gross carrying amount
Allowance for impairment
Allowances for impairment of stage 2 –
simplified procedure
Allowances for impairment of stage 3
2,600
–
– 20
– 34
2,723
– 56
–
–
Net carrying amount
2,546
2,667
in € million
Balance at 1 January *
Allocated (+)
Reversed (–)
Utilised
Exchange rate impact and other changes
Balance at 31 December
2018
60
21
– 26
– 1
–
54
* The difference between the closing balance at 31 December 2017 and the opening balance
at 1 January 2018 corresponds to the adjustment recorded in accordance with IFRS 9.
The impairment allowances according to IAS 39 in the
financial year 2017 developed as follows:
2017
Allowance for impairment
recognised on a
in € million
specific
item basis
group basis
Total
Balance at 1 January
Allocated (+) / reversed (–)
Utilised
Exchange rate impact and
other changes
Balance at 31 December *
46
8
– 4
– 1
49
11
– 2
– 1
– 1
7
57
6
– 5
– 2
56
* The difference between the closing balance at 31 December 2017 and the opening balance
at 1 January 2018 corresponds to the adjustment recorded in accordance with IFRS 9.
In the case of trade receivables, collateral is generally
held in the form of vehicle documents and bank guar-
antees so that the risk of bad debt loss is very limited.
Expenses for impairment losses and income from
the reversal of impairment losses is not significant in
relation to total Group expenses and is therefore not
reported separately in the income statement.
154
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
31
Equity
number of shares issued
Preferred stock
Common stock
2018
2017
2018
2017
Shares issued / in circulation at 1 January
55,605,404
55,114,404
601,995,196
601,995,196
Shares issued in conjunction with Employee Share Programme
Less: shares repurchased and re-issued
Shares issued / in circulation at 31 December
521,524
491,114
24
114
–
–
–
–
56,126,904
55,605,404
601,995,196
601,995,196
All Company stock is issued to bearer and each share
has a par value of € 1.00. Preferred stock, to which no
voting rights are attached, bear an additional dividend
of € 0.02 per share.
In 2018, a total of 521,524 shares of preferred stock
was sold to employees at a reduced price of € 46.26 per
share in conjunction with the Company’s Employee
Share Programme. These shares are entitled to
receive dividends for the first time with effect from
the financial year 2019.
Issued share capital increased by € 0.5 million as a
result of the issue to employees of 521,500 new shares
of non-voting preferred stock. BMW AG is authorised
up to 14 May 2019 to issue 5 million shares of non-
voting preferred stock amounting to nominal € 5.0 mil-
lion. At the end of the reporting period, 3.1 million
of these amounting to nominal € 3.1 million remained
available for issue.
In addition, 24 previously issued shares of preferred
stock were acquired and re-issued to employees.
Capital reserves
Capital reserves include premiums arising from the
issue of shares and totalled € 2,118 million (2017:
€ 2,084 million). The change related to the share cap-
ital increase arising in conjunction with the issue of
shares of preferred stock to employees amounting
to € 34 million.
revenue reserves
Revenue reserves comprise the non-distributed earn-
ings of companies consolidated in the Group Financial
Statements. In addition, remeasurements of the net
defined benefit obligation for pension plans are also
presented in revenue reserves.
It is proposed that the unappropriated profit of BMW AG
for the financial year 2018 amounting to € 2,303 mil-
lion according to HGB be utilised as follows:
— Distribution of a dividend of 3.52 per share of
preferred stock (€ 196 million)
— Distribution of a dividend of 3.50 per share of
common stock (€ 2,107 million)
The proposed distribution was not recognised as a
liability in the Group Financial Statements.
Group Financial Statements
155
The capital structure at the end of the reporting period
was as follows:
in € million
31. 12. 2018
31. 12. 2017*
Equity attributable to shareholders
of BMW AG
Proportion of total capital
see
notes 6 and 7
Non-current financial liabilities
Current financial liabilities
Total financial liabilities
Proportion of total capital
57,559
35.7 %
64,772
38,825
103,597
64.3 %
53,671
36.2 %
53,548
41,100
94,648
63.8 %
Total capital
161,156
148,319
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
The equity ratio attributable to shareholders of
BMW AG increased during the financial year by
7.2 %, primarily reflecting the increase in revenue
reserves.
Accumulated other equity
Accumulated other equity comprises amounts recog-
nised directly in equity resulting from the translation
of the financial statements of foreign subsidiaries,
changes in the fair value of derivative financial instru-
ments and marketable securities, costs of hedging
recognised directly in equity as well the related
deferred taxes.
Further information regarding the transition effects
recognised directly in equity on the first-time application
of IFRS 15 and IFRS 9 is provided in
notes 6 and 7.
Capital management disclosures
The BMW Group’s objectives with regard to capital
management are to safeguard over the long-term the
Group’s ability to continue as a going concern and to
provide an adequate return to shareholders.
The capital structure is managed in order to meet
needs arising from changes in economic conditions
and the risks of the underlying assets.
The BMW Group is not subject to any unified external
minimum equity capital requirements. Within the
Financial Services segment, however, there are a
number of individual entities which are subject to
equity capital requirements of relevant regulatory
banking authorities.
In order to manage its capital structure, the BMW Group
uses various instruments, including the amount of
dividends paid to shareholders and share buybacks.
Moreover, the BMW Group actively manages debt
capital, carrying out funding activities with a target
debt structure in mind. A key aspect in the selection
of financial instruments is the objective to achieve
matching maturities for the Group’s financing require-
ments. In order to reduce non-systematic risk, the
BMW Group uses a variety of financial instruments
available on the world’s capital markets to achieve
diversification.
156
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
32
Pension provisions
In the case of defined benefit plans, the BMW Group
is required to pay the benefits it has granted to
present and past employees. Defined benefit plans
may be covered by provisions or pension assets. In
Germany, pension entitlements are mostly covered
by assets transferred to BMW Trust e. V., Munich, in
conjunction with a Contractual Trust Arrangement
(CTA). Funded plans also exist in the UK, the USA,
Switzerland, Belgium and Japan. In the meantime,
most of the defined benefit plans have been closed
to new entrants.
The assumptions stated below, which depend on
the economic situation in the relevant country, are
used to measure the defined benefit obligation
of each pension plan. In Germany, the so-called
“pension entitlement trend” (Festbetragstrend)
remained at 2.0 %. The following weighted average
values have been used for Germany, the UK and
other countries:
in %
Discount rate
Pension level trend
Weighted duration of all pension obligations in years
Germany
United Kingdom
Other
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
1.91
1.62
20.2
1.79
1.82
20.8
2.69
2.25
19.0
2.34
2.44
21.3
3.66
–
17.2
3.13
–
18.3
The following mortality tables are applied in countries,
in which the BMW Group has significant defined
benefit plans:
Germany
United Kingdom
Mortality Table 2018 G issued by Prof. K. Heubeck (with invalidity rates reduced by 70 %)
S2PA tables and S2PA light tables with weightings
Based on the measurement principles contained in
IAS 19, the following balance sheet carrying amounts
apply to the Group’s pension plans:
in € million
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
Germany
United Kingdom
Other
Total
Present value of defined benefit
obligations
Fair value of plan assets
Effect of limiting net defined benefit
asset to asset ceiling
11,542
9,721
11,641
9,604
8,277
8,167
–
–
Carrying amounts at 31 December
1,821
2,037
thereof pension provision
thereof assets
1,823
– 2
2,037
–
9,594
8,908
–
686
702
– 16
1,428
1,049
1,475
965
21,247
18,937
22,710
19,477
3
382
382
–
3
513
513
–
3
3
2,313
3,236
2,330
– 17
3,252
– 16
–
110
125
– 15
Group Financial Statements
157
united Kingdom
Defined benefit plans exist in the United Kingdom
which are closed for all plan participants. Vested
benefits remain in place. New benefits are covered
by contributions made to a defined contribution plan.
The pension plans are administered by BMW Pension
Trustees Limited, Farnborough, and BMW (UK) Trustees
Limited, Farnborough, both trustee companies which
act independently of the BMW Group. BMW (UK)
Trustees Limited, Farnborough, is represented by
ten trustees and BMW Pension Trustees Limited,
Farnborough, by five trustees. A minimum of one
third of the trustees must be elected by plan partic-
ipants. The trustees represent the interests of plan
participants and decide on investment strategies.
Funding contributions to the funds are determined
in agreement with the BMW Group.
Numerous defined benefit plans exist within the
BMW Group.
The most significant of the BMW Group’s pension
plans are described below.
Germany
Both employer- and employee-funded benefit plans
exist in Germany. Benefits paid in conjunction with
these plans comprise old-age retirement pensions as
well as invalidity and surviving dependents’ benefits.
The defined benefit plans have been closed to new
entrants. Defined contribution plans with a minimum
rate of return, comprising employer- and employee-
f unded components, continue to exist. The fact that
the plan involves a minimum rate of return means that
the defined contribution entitlements are classified
in accordance with IAS 19 as defined benefit plans.
In the case of defined benefit plans involving the
payment of a pension, the amount of benefits to be
paid is determined by multiplying a fixed amount by
the number of years of service.
The assets of the German pension plans are invested
by BMW Trust e. V., Munich, in accordance with a
CTA. The representative bodies of this entity are
the Board of Directors and the Members’ General
Meeting. BMW Trust e. V., Munich, currently has
seven members and three members of the Board of
Directors elected by the Members’ General Meeting.
The Board of Directors is responsible for investments,
drawing up and deciding on investment guidelines as
well as monitoring compliance with those guidelines.
The members of the association can be BMW Group
employees, senior executives and members of the
Board of Management. An ordinary Members’ General
Meeting takes place once every calendar year, and
deals with a range of matters, including receiving and
approving the association’s annual report, ratifying
the activities of the Board of Directors and adopting
changes to the association’s statutes.
158
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
The change in the net defined benefit obligation for pension
plans can be derived as follows:
in € million
1 January 2018
ExpEnSE / IncoME
Current service cost
Interest expense (+) / income (–)
Past service cost
Gains (–) or losses (+) arising from settlements
reMeASureMentS
Gains (–) or losses (+) on plan assets, excluding amounts included
in interest income
Gains (–) or losses (+) arising from changes in financial assumptions
Gains (–) or losses (+) arising from changes in demographic assumptions
Gains (–) or losses (+) arising from experience adjustments
Changes in the limitation of the net defined benefit asset to the
asset ceiling
Transfers to fund
Employee contributions
Pensions and other benefits paid
Translation differences and other changes
31 December 2018
thereof pension provision
thereof assets
in € million
1 January 2017
ExpEnSE / IncoME
Current service cost
Interest expense (+) / income (–)
Past service cost
Gains (–) or losses (+) arising from settlements
reMeASureMentS
Gains (–) or losses (+) on plan assets, excluding amounts included
in interest income
Gains (–) or losses (+) arising from changes in financial assumptions
Gains (–) or losses (+) arising from changes in demographic assumptions
Gains (–) or losses (+) arising from experience adjustments
Changes in the limitation of the net defined benefit asset to the
asset ceiling
Transfers to fund
Employee contributions
Pensions and other benefits paid
Translation differences and other changes
31 December 2017
thereof pension provision
thereof assets
Defined
benefit
obligation
Plan assets
Total
Effect of limitation
of the net defined
benefit asset to the
asset ceiling
22,710
– 19,477
3,233
508
475
59
–
–
– 1,274
– 416
– 264
–
–
73
– 632
8
–
– 413
–
– 10
999
–
–
–
–
– 658
– 73
689
6
508
62
59
– 10
999
– 1,274
– 416
– 264
–
– 658
–
57
14
21,247
– 18,937
2,310
3
–
–
–
–
–
–
–
–
–
–
–
–
–
3
Net defined
benefit liability
3,236
508
62
59
– 10
999
– 1,274
– 416
– 264
–
– 658
–
57
14
2,313
2,330
– 17
Defined
benefit
obligation
Plan assets
Total
Effect of limitation
of the net defined
benefit asset to the
asset ceiling
Net defined
benefit liability
22,899
– 18,315
4,584
581
489
– 2
– 212
–
322
– 152
– 134
–
–
86
– 619
– 548
–
– 408
–
–
– 590
–
–
–
–
581
81
– 2
– 212
– 590
322
– 152
– 134
–
– 1,165
– 1,165
– 86
637
450
–
18
– 98
3,233
22,710
– 19,477
3
–
–
–
–
–
–
–
–
–
–
–
–
–
3
4,587
581
81
– 2
– 212
– 590
322
– 152
– 134
–
– 1,165
–
18
– 98
3,236
3,252
– 16
Group Financial Statements
159
Past service cost in the financial year 2018 results
mainly from the estimated effects of a court order
made in October 2018 in the UK. The court ruling
related to gender equality in state-guaranteed min-
imum pension (GMP) plans and requires existing
pension entitlements to be adjusted.
in the United Kingdom. The revision of German mor-
tality tables had an offsetting effect.
Depending on the cash flow profile and risk structure
of the pension obligations involved, pension plan
assets are invested in a diversified portfolio.
The gains arising from changes in demographic
assumptions relate mainly to revised mortality tables
Plan assets in Germany, the UK and other countries
comprised the following:
in € million
2018
2017
2018
2017
2018
2017
2018
2017
Germany
United Kingdom
Other
Total
CoMponentS of plAn ASSetS
Equity instruments
Debt instruments
thereof investment grade
thereof mixed funds
(funds without a rating)
thereof non-investment grade
Real estate funds
Money market funds
Absolute return funds
Other
1,565
5,604
3,402
–
2,202
–
–
–
–
1,682
5,668
3,231
–
2,437
–
–
–
–
407
5,774
5,224
–
550
–
221
–
–
478
6,354
5,734
–
620
–
191
51
–
172
552
518
–
34
93
47
–
15
222
469
434
–
35
93
42
–
5
2,144
11,930
9,144
–
2,786
93
268
–
15
2,382
12,491
9,399
–
3,092
93
233
51
5
Total with quoted market price
7,169
7,350
6,402
7,074
879
831
14,450
15,255
Debt instruments
thereof investment grade
thereof mixed funds
(funds without a rating)
thereof non-investment grade
Real estate
Cash and cash equivalents
Absolute return funds
Other
1,009
307
702
–
325
12
669
537
935
198
737
–
240
16
708
354
270
–
216
54
678
–
605
212
404
–
404
–
662
10
617
141
1
–
–
1
36
1
65
67
Total without quoted market price
2,552
2,253
1,765
1,834
170
1
–
–
1
–
1
47
86
135
1,280
307
918
55
1,039
13
1,339
816
4,487
1,340
198
1,141
1
902
27
1,372
581
4,222
31 December
9,721
9,603
8,167
8,908
1,049
966
18,937
19,477
Employer contributions to plan assets are expected to
amount to € 526 million in the coming year.
The BMW Group is exposed to risks arising both from
defined benefit plans and defined contribution plans
with a minimum return guarantee. The discount rates
used to calculate pension obligations are subject to
market fluctuation and therefore influence the level of
the obligations. Furthermore, changes in other actu-
arial parameters, such as expected rates of inflation,
also have an impact on pension obligations. In order
to reduce currency exposures, a substantial portion
of plan assets is either invested in the same cur-
rency as the underlying plan or hedged by means of
currency derivatives. As part of the internal reporting
procedures and for internal management purposes,
financial risks relating to the pension plans are reported
using a value-at-risk approach by reference to the
pension deficit. The investment strategy is also subject
to regular review together with external consultants,
with the aim of ensuring that investments are struc-
tu red to match the timing of pension payments and
the expected development of pension obligations. In
this way, fluctuations in pension funding shortfalls
are reduced.
160
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
The defined benefit obligation relates to current
employees, pensioners and former employees with
vested benefits as follows:
in %
Current employees
Pensioners
Former employees with vested benefits
Defined benefit obligation
Germany
United Kingdom
Other
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
65.9
29.3
4.8
66.6
28.3
5.1
–
48.5
51.5
23.9
45.0
31.1
77.3
18.8
3.9
78.5
17.8
3.7
100.0
100.0
100.0
100.0
100.0
100.0
The sensitivity analysis provided below shows the
extent to which changes in individual factors at the
end of the reporting period influence the defined
benefit obligation.
It is only possible to aggregate sensitivities to a lim-
ited extent. Since the change in obligation follows
a non-linear pattern, estimates made on the basis
of the specified sensitivities are only possible with
this restriction. The calculation of sensitivities using
ranges other than those specified could result in
a disproportional change in the defined benefit
obligation.
Discount rate
Pension level trend
Average life expectancy
Pension entitlement trend
Change in defined benefit obligation
31. 12. 2018
31. 12. 2017
in € million
in %
in € million
in %
increase of 0.75 %
decrease of 0.75 %
increase of 0.25 %
decrease of 0.25 %
increase of 1 year
decrease of 1 year
increase of 0.25 %
decrease of 0.25 %
– 2,652
3,334
597
– 567
770
– 779
156
– 147
– 12.5
– 3,055
– 13.5
15.7
2.8
– 2.7
3.6
– 3.7
0.7
– 0.7
3,878
712
– 672
856
– 855
162
– 155
17.1
3.1
– 3.0
3.8
– 3.8
0.7
– 0.7
In the UK, the sensitivity analysis for the pension
level trend also takes account of restrictions due to
caps and floors.
Group Financial Statements 161
33
Other provisions
Other provisions changed during the year as follows:
in € million
1.1.2017*
Translation
differences
Additions
Reversal of
discounting
Utilised
Reversed
31. 12. 2018
thereof due
within one year
Statutory and non-statutory warranty
obligations, product guarantees
Obligations for personnel and
social expenses
Other obligations
Other obligations for ongoing
operational expenses
Other provisions
5,074
2,782
2,523
1,620
11,999
85
1
– 10
34
110
1,959
1,827
653
694
5,133
59
– 2,019
–
5,158
1,367
–
–
–
– 1,761
– 454
– 481
59
– 4,715
– 30
– 625
– 77
– 732
2,819
2,087
1,790
11,854
1,861
1,310
1,540
6,078
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
34
Income tax liabilities
Current income tax liabilities totalling € 1,158 million
(2017: € 1,124 million) include € 96 million (2017:
€ 68 million) which are expected to be settled after
more than twelve months. Liabilities may be settled
earlier than this depending on the timing of pro-
ceedings.
Depending on when claims occur, it is possible that the
BMW Group may be called upon to fulfil the warranty
or guarantee obligations over the whole period of
the warranty or guarantee. Expected reimbursement
claims at 31 December 2018 amounted to € 933 million
(2017: € 847 million).
Provisions for obligations for personnel and social
expenses comprise mainly performance-related
remuneration components, early retirement part-time
working arrangements and employee long-service
awards.
Provisions for other obligations cover numerous
specific risks and uncertain obligations, in particular
for litigation and liability risks.
Other obligations for ongoing operational expenses
include in particular expected payments for bonuses
and other price deductions.
Income from the reversal of other provisions amoun-
ting to € 516 million (2017: € 322 million) is recorded
in cost of sales and in selling and administrative
expenses.
162
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
35
Financial liabilities
Financial liabilities of the BMW Group comprise the
following:
in € million
Bonds
Asset-backed financing transactions
Liabilities from customer deposits (banking)
Liabilities to banks
Commercial paper
Derivative instruments
Other
Financial liabilities
in € million
Bonds
Asset-backed financing transactions
Liabilities from customer deposits (banking)
Liabilities to banks
Commercial paper
Derivative instruments
Other
Financial liabilities
31. 12. 2018
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
9,762
5,732
10,961
8,678
2,480
646
566
32,592
11,603
3,289
3,293
–
915
159
10,992
–
109
1,225
–
114
481
Total
53,346
17,335
14,359
13,196
2,480
1,675
1,206
38,825
51,851
12,921
103,597
31. 12. 2017
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
11,132
6,037
10,144
8,440
4,461
373
513
25,887
10,818
3,296
3,170
–
544
150
7,861
–
132
1,048
–
173
469
Total
44,880
16,855
13,572
12,658
4,461
1,090
1,132
41,100
43,865
9,683
94,648
Group Financial Statements
Liabilities related to financing activities can be rec-
onciled as follows:
163
in € million
Bonds
Asset-backed financing transactions
Liabilities from customer deposits (banking)
Liabilities to banks
Commercial paper
Financial liabilities towards companies in which an
investment is held
Liabilities from finance lease contracts
Other (excluding interest payable)
Liabilities relating to financing activities
in € million
Bonds
Asset-backed financing transactions
Liabilities from customer deposits (banking)
Liabilities to banks
Commercial paper
Financial liabilities towards companies in which an
investment is held
Liabilities from finance lease contracts
Other (excluding interest payable)
Liabilities relating to financing activities
1. 1. 2018
Cash inflows /
outflows
Changes due to
the acquisition
or disposal of
companies
Changes due to
exchange rate
factors
44,880
16,855
13,572
12,658
4,461
739
114
604
93,883
7,784
288
557
679
– 2,021
– 210
– 9
– 31
7,037
–
–
–
–
–
–
–
–
–
Changes in
fair values
– 33
–
–
–
–
–
–
–
Other changes
31. 12. 2018
8
–
3
–
–
–
–
15
26
53,346
17,335
14,359
13,196
2,480
529
105
626
101,976
707
192
227
– 141
40
–
–
38
1,063
– 33
1. 1. 2017
Cash inflows /
outflows
Changes due to
the acquisition
or disposal of
companies
Changes due to
exchange rate
factors
Changes in
fair values
Other changes
31. 12. 2017
44,421
16,474
13,512
14,892
3,852
615
127
684
94,577
2,687
1,338
656
– 1,579
953
124
– 13
– 143
4,023
–
–
–
–
–
–
–
151
151
– 1,901
– 328
– 957
– 596
– 655
– 344
–
–
– 88
–
–
–
–
–
–
–
– 4,541
– 328
1
–
–
–
–
–
–
–
1
44,880
16,855
13,572
12,658
4,461
739
114
604
93,883
Issue volume
in relevant currency
(ISO-Code)
Weighted average
maturity period
(in years)
Weighted average
nominal interest rate
(in %)
164
Bonds comprise:
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Issuer
BMW Finance N. V.
BMW US Capital, LLC
BMW Canada Inc.
Other
Interest
variable
variable
variable
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
variable
variable
variable
fixed
fixed
fixed
fixed
fixed
variable
fixed
variable
variable
fixed
fixed
fixed
fixed
EUR 6,100 million
USD 130 million
GBP 20 million
EUR 21,150 million
JPY 19,100 million
NOK 2,400 million
CNY 2,300 million
SEK 1,750 million
HKD 1,342 million
GBP 1,150 million
USD 300 million
AUD 290 million
USD 3,608 million
EUR 500 million
NZD 30 million
USD 13,450 million
EUR 2,500 million
HKD 334 million
GBP 300 million
AUD 130 million
CAD 500 million
CAD 1,400 million
GBP 1,175 million
SEK 500 million
KRW 120,000 million
CNY 8,000 million
INR 8,000 million
NOK 1,000 million
fixed
GBP 850 million
2.1
1.3
2.0
6.3
5.8
3.8
3.0
5.0
4.7
5.8
4.0
6.9
2.8
3.0
3.0
5.7
7.6
3.0
5.0
3.5
2.6
3.9
2.2
3.0
3.0
3.0
2.5
10.0
4.6
0.0
2.8
1.2
1.0
0.4
1.8
4.3
1.8
2.1
1.5
2.5
3.3
2.5
0.0
2.0
2.7
1.0
2.0
2.0
2.8
2.7
2.0
1.1
0.3
2.6
4.4
8.0
3.3
1.6
The following details apply to commercial paper:
Issuer
BMW Finance N. V.
BMW International Investment B. V.
BMW India Financial Services Private Ltd.
Issue volume
in relevant currency
(ISO-Code)
Weighted average
maturity period
(in days)
Weighted average
nominal interest rate
(in %)
EUR 2,030 million
GBP 350 million
INR 4,500 million
140
59
44
– 0.3
0.9
7.9
Group Financial Statements
165
31. 12. 2018
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
2,771
4,311
2,940
945
736
560
781
76
92
1,905
15,117
4,260
453
–
–
–
175
280
–
26
–
87
–
–
–
–
10
–
–
–
8
4,828
471
31. 12. 2017 *
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
2,284
2,807
3,097
934
934
505
744
75
129
1,934
13,443
3,954
428
–
–
–
122
346
–
23
–
160
4,605
–
–
–
–
5
–
–
–
7
440
Total
7,484
4,311
2,940
945
911
850
781
102
92
2,000
20,416
Total
6,666
2,807
3,097
934
1,056
856
744
98
129
2,101
18,488
36
Other liabilities
Other liabilities comprise the following items:
in € million
Deferred income
Refund liabilities for future leased products
Bonuses and sales aides
Other taxes
Advance payments from customers
Deposits received
Payables to other companies in which an investment is held
Social security
Payables to subsidiaries
Sundry
Other liabilities
in € million
Deferred income
Refund liabilities for future leased products
Bonuses and sales aides
Other taxes
Advance payments from customers
Deposits received
Payables to other companies in which an investment is held
Social security
Payables to subsidiaries
Sundry
Other liabilities
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
Sundry other liabilities include mainly commission
payable and credit balances on customers’ accounts.
Other liabilities include contract liabilities relating to
contracts with customers amounting to € 4,985 million
(31 December 2017: € 4,820 million).
An amount of € 2,134 million (2017: € 2,294 million)
was released from contract liabilities in the financial
year and recognised as revenues from contracts with
customers.
166
Deferred income comprises the following items:
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Other Disclosures
in € million
Deferred income relating to service contracts
Deferred income from lease financing
Grants
Other deferred income
Deferred income
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
31. 12. 2018
31. 12. 2017 *
Total
thereof due
within one year
Total
thereof due
within one year
3,826
2,764
337
557
7,484
1,534
1,092
27
118
2,771
3,659
2,361
332
314
6,666
1,228
973
28
55
2,284
Deferred income relating to service contracts com-
prises service and repair work as well as telematics
services and roadside assistance agreed to be part of
the sale of a vehicle (in some cases multi-component
arrangements). Deferred income from lease financing
relates primarily to down payments on leases.
Grants comprise mainly public sector funds to
promote regional structures and which have been
invested in the production plants in Brazil, Mexico,
Leipzig and Berlin. The grants are partly subject to
holding periods for the assets concerned of up to five
years and / or minimum employment figures. Grant
income is recognised in the income statement over
the useful lives of the assets to which it relates.
37
Trade payables
As in the previous year, trade payables are due within
one year.
Group Financial Statements
167
Regulatory authorities have ordered the BMW Group
to recall various vehicle models in conjunction with
airbags supplied by the Takata group of companies.
Provision for the costs involved has been recognised
within warranty provisions. In addition to the risks
already covered by warranty provisions, it cannot be
ruled out that further BMW Group vehicles will be
affected by future recall actions. Further disclosures
pursuant to IAS 37.86 cannot be provided at present.
other financial commitments
In addition to liabilities, provisions and contingent
liabilities, other financial commitments consist in
particular of rental and leasing contracts for build-
ings, property, machinery, tools, offices and other
facilities. Contracts have terms of up to 121 years and
include in part renewal and purchase options or price
adjustments in the form of index-linked or graduated
rent, for example to compensate inflation.
In the financial year 2018, an expense of € 483 million
(2017: € 430 million) was recognised for payments on
operating leases.
Total minimum future lease payments from non-can-
cellable rental contracts by maturity is as follows:
in € million
31. 12. 2018
31. 12. 2017
due within one year
due between one and five years
due later than five years
Other financial obligations
468
1,310
916
2,694
446
1,179
849
2,474
In addition, the following commitments exist for the
BMW Group at the end of the reporting period:
in € million
31. 12. 2018
31. 12. 2017
Purchase commitments for
property, plant and equipment
Purchase commitments for
intangible assets
3,486
4,137
1,554
1,804
OTHER DISCLOSURES
38
Contingent liabilities and other financial
commitments
Contingent liabilities
The following contingent liabilities existed at the
balance sheet date:
in € million
31. 12. 2018
31. 12. 2017
Investment subsidies
Litigation
Guarantees
Other
Contingent liabilities
275
125
14
351
765
399
204
10
203
816
Other contingent liabilities comprise mainly risks
relating to taxes and customs duties.
The BMW Group determines its best estimate of
contingent liabilities on the basis of the information
available at the reporting date. This assessment may
change over time and is adjusted regularly on the basis
of new information and circumstances. A part of the
risks is covered by insurance.
In June 2016, Germanyʼs Federal Cartel Agency con-
ducted searches at various carmakers and suppliers,
including BMW AG, in relation to the purchase of
steel. The respective investigations have not yet been
completed. More extensive disclosures pursuant to
IAS 37.86 cannot be provided at present.
In July 2017, cartel allegations against five German
car manufacturers appeared in the press. Internal
investigations were initiated by the BMW Group
and have not yet been completed. In October 2017,
the European Commission began an inspection at
the BMW Group, and in September of the current
financial year opened formal proceedings pertaining
to specific matters. A number of class actions were
brought in the USA and Canada. Possible risks for
the BMW Group can neither be foreseen in detail nor
quantified at present. Further disclosures pursuant to
IAS 37.86 cannot be provided at present.
168
Notes to the Group
Financial Statements
Other Disclosures
39
Financial instruments
The carrying amounts of financial instruments are
assigned to IFRS 9 categories * in the following table.
in € million
ASSetS
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other
Cash and cash equivalents
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies in which
an investment is held
Collateral assets
Other
Total
lIAbIlItIeS
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset-backed financing transactions
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Other
Trade payables
Other liabilities
Payables to subsidiaries
Payables to other companies in which
an investment is held
Other
Total
31. 12. 2018
At amortised cost
At fair value
through other com-
prehensive income
At fair value
through profit
or loss
–
86,783
–
–
–
675
17
244
128
10,094
2,546
295
1,916
293
1,444
–
–
–
–
–
3,671
–
–
–
–
–
–
–
–
–
429
–
840
654
483
970
3
–
–
885
–
–
–
–
–
104,435
3,671
4,264
53,346
13,196
14,359
2,480
17,335
–
–
–
1,206
9,669
92
781
5,665
118,129
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
697
556
422
–
–
–
–
–
1,675
* The carrying amounts of cash flow hedges and fair value hedges are categorised as at fair value through profit or loss for the sake of clarity. Receivables from sales financing are shown including finance leases.
Group Financial Statements
For the financial year 2017, items are allocated by
category in accordance with the requirements of
IAS 39 * as applied in that year:
169
Cash funds
Loans and
receivables
Available for sale
Fair value option
Other liabilities
Held for trading
31. 12. 2017
in € million
ASSetS
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other
Cash and cash equivalents
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies in which
an investment is held
Collateral assets
Other
–
–
–
–
–
–
–
–
–
9,039
–
–
–
219
–
–
80,434
–
–
–
–
112
248
184
–
2,667
276
1,334
–
1,108
366
–
–
–
–
5,447
–
–
–
–
–
–
–
97
–
29
–
–
–
–
–
2
–
–
–
–
–
–
–
–
Total
9,258
86,363
5,910
31
lIAbIlItIeS
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset-backed financing transactions
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Other
Trade payables
Other liabilities
Payables to subsidiaries
Payables to other companies in which
an investment is held
Other
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
* The carrying amounts of cash flow hedges and fair value hedges are categorised as held for trading for the sake of clarity. Receivables from sales financing are shown including finance leases.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44,880
12,658
13,572
4,461
16,855
–
–
–
1,132
9,731
129
744
5,949
–
–
2,187
814
1,340
–
–
–
–
–
–
–
–
–
–
4,341
–
–
–
–
–
190
571
329
–
–
–
–
–
110,111
1,090
170
Notes to the Group
Financial Statements
Other Disclosures
The following table shows the fair values and carrying
amounts of financial assets and liabilities that are
measured at cost or amortised cost and whose carrying
amounts differ from their fair value. For some balance
sheet items, fair value corresponds to the carrying
amount due to their short maturity.
in € million
Fair value
Carrying amount
Fair value
Carrying amount
31. 12. 2018
31. 12. 2017
Receivables from sales financing
Bonds
Asset-backed financing transactions
Liabilities from customer deposits (banking)
Liabilities to banks
90,445
53,831
17,443
14,374
13,277
86,783
53,346
17,335
14,359
13,196
83,853
45,566
17,005
13,588
12,724
80,434
44,880
16,855
13,572
12,658
At 31 December 2018 the financial assets and liabil-
ities measured at fair value according to IFRS 9 are
classified as follows in the measurement levels in
accordance with IFRS 13.
in € million
Marketable securities, investment funds and collateral assets
Other investments
Cash equivalents
Loans to third parties
Derivative instruments (assets)
Interest rate risks
Currency risks
Raw material market price risks
Other risks
Derivative instruments (liabilities)
Interest rate risks
Currency risks
Raw materials market price risks
31. 12. 2018
Level hierarchy in accordance with IFRS 13
Level 1
Level 2
Level 3
4,641
164
–
–
–
–
–
–
–
–
–
–
–
885
–
1,069
713
191
–
923
409
343
–
265
–
3
–
–
–
4
–
–
–
The classification of financial assets and liabili-
ties measured at fair value according to IAS 39 to
measurement levels in accordance with IFRS 13 at
31 December 2017 was as follows:
in € million
Marketable securities, investment funds and collateral assets – available-for-sale
Other investments – available-for-sale / fair value option
Cash equivalents
Loans to third parties
Derivative instruments (assets)
Interest rate risks
Currency risks
Raw material market price risks
Other risks
Derivative instruments (liabilities)
Interest rate risks
Currency risks
Raw materials market price risks
31. 12. 2017
Level hierarchy in accordance with IFRS 13
Level 1
Level 2
Level 3
5,544
284
–
–
–
–
–
–
–
–
–
–
–
–
–
1,797
2,008
534
–
778
221
91
–
105
–
2
–
–
–
2
–
–
–
Group Financial Statements
171
The allocation to measurement levels at 31 Decem-
ber 2018 takes account of the reclassifications of
financial instruments made in conjunction with the
note 7. There
first-time application of IFRS 9 see
were no reclassifications within the level hierarchy
either in the financial year 2017 or in the financial
year 2018.
see
note 7
cash flow method was used, taking account of the
BMW Group’s own credit risk; for this reason, the fair
values calculated can be allocated to Level 2. Finan-
cial instruments recognised at fair value for which
no market price is available are allocated to Level 3.
Fair values are determined in accordance with the
following table:
Where the fair value was required for a financial
instrument for disclosure purposes, the discounted
in € million
Fair value
31.12.2018
Valuation method
Input Parameter
Unquoted equity instruments
265
Last financing round
Price per share
3
4
Milestone analysis (quantitative and
qualitative factors)
Company performance
Contractual rights by share class
Income-based approach
Expected Company performance
Risk adequate discounted
interest rate
Last financing round
Price per share
Milestone analysis (quantitative and
qualitative factors)
Company performance
Consideration of exercise price
Contractual rights by share class
Exercise price
Convertible bonds
Options on unquoted equity instruments
Level 3 financial assets relate mainly to investments in
a venture capital fund. The private equity companies
are valued on the basis of their net asset value which
is determined using relevant information that is not
available in the public domain. The fund manager
assesses the underlying individual companies in
accordance with the guidelines for international
private equity and venture capital valuations (IPEV).
An increase in input parameters would normally also
lead to a similar increase in valuation.
172
Notes to the Group
Financial Statements
Other Disclosures
The balance sheet carrying amount of Level 3 financial
instruments developed as follows:
in € million
1 January 2018 *
Additions
Disposals
Gains (+) / losses (–) recognised in accumulated other equity
Gains (+) / losses (–) recognised in the income statement
Currency translation differences
31 December 2018
* Opening balance adjusted due to first-time application of IFRS 9.
in € million
1 January 2017
Additions
Disposals
Gains (+) / losses (–) recognised in accumulated other equity
Gains (+) / losses (–) recognised in the income statement
Currency translation differences
31 December 2017
Unquoted equity
instruments
Convertible bonds
Options on
unquoted equity
instruments
Financial Instru-
ments Level 3
111
103
– 4
–
45
10
265
2
3
– 2
–
–
–
3
2
–
–
–
2
–
4
115
106
– 6
–
47
10
272
Unquoted equity
instruments
Convertible bonds
Options on
unquoted equity
instruments
Financial Instru-
ments Level 3
–
103
–
8
–
– 6
105
–
2
–
–
–
–
2
–
–
–
–
3
– 1
2
–
105
–
8
3
– 7
109
offsetting of financial instruments
Derivative financial instruments of the BMW Group
are subject to legally enforceable master netting agree-
ments or similar contracts. However, receivables and
payables relating to derivative financial instruments
are not netted due to non-fulfilment of the stipulated
criteria. Offsetting would have the following impact
on the carrying amounts of derivatives:
in € million
31. 12. 2018
31. 12. 2017
Reported on
assets side
Reported on equity
and liabilities side
Reported on
assets side
Reported on equity
and liabilities side
Balance sheet amounts as reported
Gross amount of derivatives which can be offset in case of insolvency
Net amount after offsetting
1,977
– 913
1,064
1,675
– 913
762
4,341
– 835
3,506
1,090
– 835
255
Group Financial Statements
Gains and losses on financial instruments
The following table shows the net gains and losses
arising on financial instruments in the financial year
2018 pursuant to IFRS 9:
in € million
Financial instruments measured at fair value through profit or loss
Financial assets measured at amortised cost
Financial liabilities measured at amortised cost
173
2018
– 150
203
155
Interest income from financial assets measured at
amortised cost relates mainly to interest income from
loan financing which is reported as revenues. Interest
income and interest expense from financial assets
at fair value through other comprehensive income
amounted to € 58 million and € 47 million respectively.
Interest expenses from financial liabilities measured
at amortised cost amounted to € 1.8 billion.
The following table shows the net gains and losses
arising on financial instruments in the financial year
2017 pursuant to IAS 39:
in € million
Held for trading
Gains / losses from the use of derivative instruments
Fair value option
Gains / losses on investments measured at fair value through profit and loss
Available-for-sale
Gains and losses on sale and fair value measurement of marketable securities held for sale
(including investments in subsidiaries and participations measured at cost)
Net income from participations and investments in subsidiaries
Accumulated other equity
Balance at 1 January
Total change during the year
thereof recognised in the income statement during the period under report
Balance at 31 December
Loans and receivables
Impairment losses / reversals of impairment losses
Other income / expenses
Other liabilities
Income / expenses
2017
961
3
48
14
52
41
– 44
93
– 162
– 94
162
credit risk
The BMW Group is exposed to counterparty credit
risks if contractual partners, for example a retail
customer or a dealership, are unable or only partially
able to meet their contractual obligations. Information
on the management of credit risk for receivables
from financial services is provided in the Combined
Management Report (see section Report on Outlook,
Risks and Opportunities).
Notwithstanding the existence of collateral accepted,
the carrying amount of financial assets (with the
exception of derivative financial instruments) generally
represents the maximum credit risk. In addition, the
credit risk is increased by additional unutilised loan
commitments for credit card business and dealership
financing. Total credit risk in these two lines of business
amounts to € 1,148 million (2017: € 1,217 million) and
€ 29,403 million (2017: € 27,953 million) respectively.
174
Notes to the Group
Financial Statements
Other Disclosures
In the case of all relationships underlying non-deriva-
tive financial instruments, in order to minimise the
credit risk and depending on the nature and amount
of exposure, collateral is required, credit information
and references obtained or historical data based on the
existing business relationship, in particular payment
behaviour, reviewed.
In the case of trade receivables, customers are regularly
assessed with regard to their credit risk. Depending
on contractual status, necessary measures, such as
dunning procedures, are initiated in good time.
The credit risk relating to cash deposits and derivative
financial instruments is minimised by the fact that the
Group only enters into such contracts with parties of
first-class credit standing.
Within the financial services business, items financed
for retail customers and dealerships (such as vehicles,
facilities and property) serve as first-ranking collateral
with a recoverable value. Security is also put up by
customers in the form of collateral asset pledges, asset
assignment and first-ranking mortgages, supplemented
where appropriate by warranties and guarantees.
Items previously held as collateral that are subsequently
acquired relate mainly to vehicles. These assets can
usually be converted into cash at short notice through
the dealership organisation. Creditworthiness testing
is an important aspect of the BMW Group’s credit
risk management. Every borrower’s creditworthiness
is tested for all credit financing and lease contracts
entered into by the BMW Group. In the case of retail
customer financing, creditworthiness is assessed
using validated scoring systems integrated into the
acquisition process. In the area of dealership financing,
creditworthiness is assessed by means of ongoing
credit monitoring and an internal rating system that
takes account not only of the material credit standing
of the borrower, but also of qualitative factors such as
past reliability in business relations.
The credit risk on trade receivables is assessed main-
ly on the basis of information relating to overdue
amounts. The gross carrying amounts of these receiv-
ables are allocated at 31 December 2018 in accordance
with IFRS 9 to overdue ranges used for management
purposes as follows:
in € million
31. 12. 2018
Not overdue
1 – 30 days overdue
31 – 60 days overdue
61 – 90 days overdue
More than 90 days overdue
Total
2,066
375
34
29
96
2,600
At 31 December 2017 trade receivables existed that
were overdue but for which no impairment allowance
was recognised in accordance with IAS 39. The over-
due amounts can be grouped in the following ranges:
in € million
31. 12. 2017
1 – 30 days overdue
31 – 60 days overdue
61 – 90 days overdue
91 – 120 days overdue
More than 120 days overdue
Balance at 31 December
187
43
19
25
75
349
Receivables from financial services (including credit
card business receivables) are allocated to internally
defined rating categories based on credit risk. The
related gross carrying amounts in accordance with
IFRS 9 were allocated at 31 December 2018 as follows:
in € million
General
Simplified
Total
Expected
credit loss
Stage 1
Stage 2
Stage 3
Gross carrying amount of financial assets
with good credit ratings
Gross carrying amount of financial assets
with medium credit ratings
Gross carrying amount of financial assets
with poor credit ratings
Total
79,597
4,382
187
84,166
751
1,059
605
2,415
420
52
37
509
–
–
987
987
80,768
5,493
1,816
88,077
269
189
592
1,050
Group Financial Statements
Further disclosures relating to credit risk – in particu-
lar with regard to the amounts of impairment losses
recognised – are provided in the explanatory notes
notes 25,
to the relevant categories of receivables in
26 and 30.
see
notes 25,
26 and 30
Liquidity risk
The following table shows the maturity structure of
expected contractual cash flows (undiscounted) for
financial liabilities:
175
31. 12. 2018
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
10,789
6,942
9,848
11,010
9,669
2,478
976
20
34,196
11,710
3,804
3,368
–
–
1,180
318
11,546
–
900
107
–
–
81
454
Total
56,531
18,652
14,552
14,485
9,669
2,478
2,237
792
51,732
54,576
13,088
119,396
31. 12. 2017
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
11,735
7,087
9,546
10,225
9,731
4,463
466
110
27,201
10,901
3,656
3,418
–
–
637
191
8,285
–
771
130
–
–
111
451
Total
47,221
17,988
13,973
13,773
9,731
4,463
1,214
752
53,363
46,004
9,748
109,115
As a further reduction of risk, a syndicated credit line
totalling € 8 billion (2017: € 8 billion) from a consortium
of international banks is available to the BMW Group.
Intragroup cash flow fluctuations are balanced out by
the use of daily cash pooling arrangements.
Further information is provided in the “Results of
Operations, Financial Position and Net Assets” section
and in the “Risks and Opportunities” section of the
Combined Management Report.
in € million
Bonds
Asset-backed financing transactions
Liabilities to banks
Liabilities from customer deposits (banking)
Trade payables
Commercial paper
Derivative instruments
Other financial liabilities
Total
in € million
Bonds
Asset-backed financing transactions
Liabilities to banks
Liabilities from customer deposits (banking)
Trade payables
Commercial paper
Derivative instruments
Other financial liabilities
Total
The cash flows from non-derivative liabilities comprise
principal repayments and the related interest. The
amounts disclosed for derivative instruments com-
prise only cash flows relating to derivatives that have
a negative fair value at the balance sheet date. At
31 December 2018 credit commitments to dealerships
which had not been called upon at the end of the
reporting period amounted to € 9,010 million (2017:
€ 8,812 million).
Solvency is assured at all times by managing and
monitoring the liquidity situation on the basis of
a rolling cash flow forecast. The resulting funding
requirements are covered by a variety of instruments
placed on the world’s financial markets, with the aim
to minimise risk by matching maturities with financ-
ing requirements and in alignment with a dynamic
target debt structure.
176
Notes to the Group
Financial Statements
Other Disclosures
Market risks
The principal market risks to which the BMW Group
is exposed are currency risk, interest rate risk and raw
materials price risk.
Protection against such risks is provided in the first
instance though natural hedging which arises when
the values or cash flows of non-derivative financial
instruments have matching maturities and amounts
(netting). Derivative financial instruments are used
to reduce the risk remaining after netting.
Currency, interest rate and raw materials price risks
of the BMW Group are managed at a corporate level.
Further information is provided in the “Report on
outlook, risks and opportunities” section of the Com-
bined Management Report.
currency risks
As an enterprise with worldwide operations, the
BMW Group conducts business in a variety of cur-
rencies, from which currency risks arise. In order to
hedge currency risks, the BMW Group holds, as at
31 December 2018, derivative financial instruments
mostly in the form of forward currency contracts and
currency swaps.
As part of the implementation of the risk management
strategy, the extent to which risk exposures should
be hedged is decided at regular intervals and the
corresponding hedging ratio defined. The economic
relationship between the hedged item and the hedging
instrument is based essentially on the fact that they
are denominated in the same currency and have the
same maturities.
The BMW Group measures currency risk using a
cash-flow-at-risk model. The analysis of currency
risk in this model is based on the planned foreign
currency transactions or “exposures”. At the end of
the reporting period, the currency exposure – in each
case for the following year – was as follows:
in € million
31. 12. 2018
31. 12. 2017*
Currency exposure
28,407
29,203
* Prior year figure adjusted, due to the fact that entire currency risk is shown, not just of the
significant currencies.
This exposure is compared to all hedges that are in
place. The net cash flow surplus represents an uncov-
ered risk position. The cash-flow-at-risk approach
involves showing the impact of potential exchange
rate fluctuations on operating cash flows on the basis
of probability distributions. Volatilities and correla-
tions serve as the main input factors to determine the
relevant probability distributions.
The potential negative impact on earnings is calcu-
lated at the reporting date for each currency for the
following financial year on the basis of current market
prices and exposures with a confidence level of 95 %.
The risk mitigating effect of correlations between the
various currencies is taken into account when the
risks are aggregated.
The following table shows the potential negative
impact for the BMW Group for the following year
resulting from unfavourable changes in exchange
rates, measured on the basis of the cash-flow-at-risk
approach.
in € million
31. 12. 2018
31. 12. 2017*
Cash flow at risk
431
581
* Prior year figure adjusted, due to the fact that entire currency risk is considered, not just of
the significant currencies.
Interest rate risk
Interest rate risks arise when funds are borrowed and
invested with differing fixed-rate periods or differing
terms. At the BMW Group, all items subject to, or
bearing, interest are exposed to interest rate risk and
can therefore affect both the assets and liabilities side
of the balance sheet.
The fair values of the Group’s interest rate portfolios
were as follows at the end of the reporting period:
in € million
31. 12. 2018
31. 12. 2017*
Fair values of interest rate portfolios
60,356
60,790
* Prior year figure adjusted, due to the fact that entire interest rate risk is shown, not just of
the significant interest rate portfolios.
Interest rate risk is managed through the use of inter-
est rate derivatives. As part of the implementation
of the risk management strategy, interest rate risks
are monitored and managed at regular intervals. The
interest rate contracts used for hedging purposes
comprise mainly swaps, which, if hedge accounting
is applied, are accounted for as fair value hedges. The
economic relationship between the hedged item and
the hedging instrument is based on the fact that the
main parameters of the hedged item and the related
hedging instrument, such as start date, term and
currency, are the same.
Group Financial Statements 177
The starting point for analysing raw materials price
risk is to identify planned purchases of raw materials
or components containing raw materials, the so-called
“exposure”. At each reporting date, the exposure for
the following financial year amounted to:
in € million
31. 12. 2018
31. 12. 2017
Raw material price exposures
4,174
3,969
This exposure is compared to all hedges that are in
place. The net cash flow surplus represents an uncovered
risk position. The cash-flow-at-risk approach involves
showing the impact of potential raw materials market
price fluctuations on operating cash flows on the basis
of probability distributions. Volatilities and corre-
lations serve as input factors to assess the relevant
probability distributions.
The potential negative impact on earnings is calculated
at the reporting date for each raw materials category
for the following financial year on the basis of current
market prices and exposure with a confidence level of
95 %. The risk mitigating effect of correlations between
the various categories of raw materials is taken into
account when the risks are aggregated.
The following table shows the potential negative impact
for the BMW Group resulting from fluctuations in
prices across all categories of raw materials, measured
on the basis of the cash-flow-at-risk approach. The
risk at each reporting date for the following financial
year was as follows:
in € million
31. 12. 2018
31. 12. 2017
Cash flow at risk
327
409
For selected fixed-interest assets, part of the interest
rate risk is hedged on a portfolio basis. In this case,
swaps are used as the hedging instrument. Hedge
relationships are terminated and redesignated on a
monthly basis at the end of each reporting period,
thereby taking account of the constantly changing
content of each portfolio.
The BMW Group applies a value-at-risk approach
throughout the Group for internal reporting purposes
and to manage interest rate risk. This approach is
based on a historical simulation in which the potential
future fair value losses of the interest rate portfolios are
compared across the Group with expected amounts
on the basis of a holding period of 250 days and a
confidence level of 99.98 %. The risk mitigating effect
of correlations between the various portfolios is taken
into account when the risks are aggregated.
The following table shows for interest-rate-sensitive
exposures of the BMW Group the potential fair value
fluctuation compared with the expected value, mea-
sured on the basis of the value-at-risk approach:
in € million
Value at risk
31. 12. 2018
31. 12. 2017*
1,123
1,180
* Prior year figure adjusted due to the fact that the entire interest rate risk is considered, not just
the significant interest rate portfolios.
Raw materials price risk
The BMW Group is exposed to market price risks on
raw materials. In order to hedge these risks, the Group
mainly used forward commodity contracts. As part of
the implementation of the risk management strategy,
the extent to which risk exposures should be hedged
is decided at regular intervals and the corresponding
hedging ratio defined.
The economic relationship between the hedged item
and the hedging instrument is based essentially on
the fact that they have the same basis and term. The
BMW Group designates only the commodity price
index-linked raw material surcharge as a hedged item.
Other price components contained in the contract are
not designated as being part of the hedge relationship
as no effective hedging instruments exist for these
components.
178
Notes to the Group
Financial Statements
Other Disclosures
disclosures on hedging measures
The following disclosures on hedging measures include
derivatives of fully consolidated companies before
offset of deferred tax.
The nominal amounts of hedging instruments at
31 December 2018 were as follows:
in € million
Currency risks
Interest rate risks
Raw material price risks
Nominal amounts of
hedging intruments
Maturity within
one year
Maturity
between one
and five years
Maturity later
than five years
17,159
4,619
1,526
9,097
24,295
2,109
–
12,027
32
23,304
35,501
12,059
Currency risks
EUR / CNY
EUR / USD
EUR / GBP
EUR / KRW
EUR / JPY
Raw material price risks
Aluminium (EUR / t)
Lead (EUR / t)
Copper (EUR / t)
Palladium (EUR / oz)
Platinum (EUR / oz)
Average
hedging rates
8.26
1.17
0.79
1,288.91
125.29
Average
hedging rates
1,797
1,784
5,279
745
945
The average hedging rates of hedging instruments
used by the BMW Group at 31 December 2018 were
as follows:
The following table provides information on the nominal
amounts, carrying amounts and fair value changes of
contracts designated as hedging instruments:
in € million
Nominal amounts
Assets
Liabilities
Change in fair value
of designated
components
Fair Values
Cash Flow Hedges
Currency risks
Raw material price risks
Fair Value Hedges
Interest rate risks
26,256
3,667
52,580
651
189
654
363
334
556
121
– 453
27
The following table summarises key information on
hedged items for each risk category and shows the
balances of designated components within accumu-
lated other equity:
in € million
Cash Flow Hedges
Currency risks
Raw material price risks
Fair Value Hedges
Interest rate risks
The accumulated amount of hedge-related fair value
adjustments is € 15 million for assets and € 243 million
for liabilities.
Fair Values
Balances in accumulated other equity
Assets
Liabilities
Change in value
of hedged items
Continuing hedge
relationships
Terminated hedge
relationships
–
–
–
–
– 119
453
941
– 262
8,930
49,846
– 33
–
– 1
–
–
Group Financial Statements
179
Change of
designated com-
ponents in other
comprehensive
income
Costs of
hedging in other
comprehensive
income
Hedge
ineffectiveness
recognised in
income statement
– 931
– 497
– 614
12
–
– 19
–
–
– 6
Currency risks
Interest rate risk
Raw materials price risk
Designated
component
Costs
of hedging
Costs
of hedging
Designated
component
Costs
of hedging
1,875
120
– 987
– 68
–
940
–
– 966
319
33
–
– 614
6
– 20
1
–
–
– 13
235
– 453
–
7
– 51
– 262
–
14
–
–
– 2
12
Hedge relationships give rise to following effects:
in € million
Cash Flow Hedges
Currency risks
Raw material price risks
Fair Value Hedges
Interest rate risks
Designated components and costs of hedging within
accumulated other equity changed as follows:
in € million
Opening balance at 1 January 2018
Change in fair value during the reporting period
Reclassification to profit or loss
for continuing hedge relationships
for terminated hedge relationships
Reclassification to acquisition costs for inventories
Closing balance at 31 December 2018
Changes in fair value include additional effects from
the application of the modified closing rate method.
The following section shows disclosures relevant for
hedging instruments used in the financial year 2017
in accordance with IAS 39.
180
Notes to the Group
Financial Statements
Other Disclosures
cash flow hedges
The impact of cash flow hedges on accumulated other
equity was as follows:
in € million
Balance at 1 January
Total changes during the year
thereof reclassified to the income statement
Balance at 31 December
2017
78
1,437
– 103
1,515
No effects were recognised in financial result in the
financial year 2017 in connection with forecasting
errors and resulting overhedging. Gains due to the
ineffective portion of cash flow hedges amounting
to € 17 million were recognised in financial result.
No effects were recognised in financial result in the
financial year 2017 in connection with forecasting
errors relating to cash flow hedges for commodities.
Losses attributable to the ineffective portion of cash
flow hedges amounting to € 1 million were recognised
in financial result.
At 31 December 2017, the BMW Group held deriva-
tive financial instruments (mainly forward currency
contracts) in order to hedge currency risks attached
to future or existing transactions. These derivative
instruments were intended to hedge forecast sales
40
Related party relationships
Transactions of Group entities with related parties
were carried out without exception in the normal
course of business of each of the parties concerned
and at market conditions.
denominated in a foreign currency over the coming
32 months. It was expected that € 336 million of net
gains, recognised in equity at 31 December 2017,
would be reclassified to profit and loss in the financial
year 2018.
Furthermore, the BMW Group held no derivative
financial instruments at 31 December 2017 which
were designated as cash flow hedges to hedge against
interest rate risks.
At 31 December 2017, the BMW Group held derivative
financial instruments, mainly commodity swaps, with
terms of up to 46 months to hedge raw materials price
risks. It was expected that € 55 million of net gains,
recognised in equity at 31 December 2017 would be
reclassified to profit and loss in the financial year 2018.
fair value hedges
The following table shows gains and losses from fair
value hedge relationships on hedging instruments and
hedged items in the financial year 2017:
in € million
31. 12. 2017
Gains / losses on hedging instruments designated as
part of a fair value hedge relationship
Gains / losses from hedged items
Ineffectiveness of fair value hedges
– 335
328
– 7
A significant proportion of the BMW Group’s transac-
tions with related parties relates to the joint venture
BMW Brilliance Automotive Ltd.
in € million
2018
2017
2018
2017
2018
2017
2018
2017
Supplies and services
performed
Supplies and services
received
Receivables
at 31 December
Payables
at 31 December
BMW Brilliance Automotive Ltd.
7,691
5,946
99
63
1,829
1,333
772
739
Business relationships of the BMW Group with other
associated companies and joint ventures as well as
with non-consolidated subsidiaries are small in scale.
Stefan Quandt, Germany, is a shareholder and Deputy
Chairman of the Supervisory Board of BMW AG.
He is also the sole shareholder and Chairman of
the Supervisory Board of DELTON Health AG,
Bad Homburg v. d. H., as well as sole shareholder of
DELTON Logistics S.à r. l., Grevenmacher, which, via
its subsidiaries, performed logistic-related services for
the BMW Group during the financial year 2018. In
addition, the companies acquired vehicles from the
BMW Group, mainly by way of leasing.
Stefan Quandt, Germany, is also the indirect major-
ity shareholder of SOLARWATT GmbH, Dresden.
Cooperation arrangements are in place between
BMW Group and SOLARWATT GmbH, Dresden,
within the field of electric mobility. The focus of this
Group Financial Statements
181
cooperation is on the provision of complete photo-
voltaic solutions for rooftop systems and carports
to BMW i customers. In 2018, SOLARWATT GmbH,
Dresden, acquired vehicles from the BMW Group by
way of leasing.
Susanne Klatten, Germany, is a shareholder and
member of the Supervisory Board of BMW AG and
also a shareholder and Deputy Chairwoman of the
Supervisory Board of ALTANA AG, Wesel. In 2018,
ALTANA AG, Wesel, acquired vehicles from the
BMW Group, mainly by way of leasing.
Susanne Klatten, Germany, is also the sole share-
holder and Chairwoman of the Supervisory Board
of UnternehmerTUM GmbH, Garching. In 2018,
the BMW Group bought in services from Unter-
nehmerTUM GmbH, Garching, mainly in the form
of consultancy and workshop services.
In addition, Susanne Klatten, Germany, and Stefan
Quandt, Germany, are indirectly sole shareholders of
Entrust Datacard Corp., Shakopee, Minnesota. Stefan
Quandt is also a member of the supervisory board of
this entity. In 2018, Entrust Datacard Corp., Shakopee,
Minnesota, acquired vehicles from the BMW Group
by way of leasing.
Seen from the perspective of BMW Group entities,
the volume of transactions with the above-mentioned
entities was as follows:
in € thousand
2018
2017
2018
2017
2018
2017
2018
2017
Supplies and services
performed
Supplies and services
received
Receivables
at 31 December
Payables
at 31 December
DELTON Health AG (formerly DELTON AG)
3,536
3,393
23,386
29,816
DELTON Logistics S. à r. l.
SOLARWATT GmbH
ALTANA AG
UnternehmerTUM GmbH
Entrust Datacard Corp.
–
22
2,322
58
103
–
36
2,421
27
106
–
1
341
1,527
–
–
–
296
1,435
–
34
–
1
401
–
2
94
–
5
360
–
5
–
2,235
–
5
367
–
4,464
–
–
36
255
–
Apart from vehicle leasing and financing contracts
at usual conditions, companies of the BMW Group
concluded no further transactions with members of
the Board of Management or Supervisory Board of
BMW AG. This also applies to close members of the
families of those persons.
BMW Trust e. V., Munich, administers assets on a
trustee basis to secure obligations relating to pen-
sions in Germany and is therefore a related party
of the BMW Group in accordance with IAS 24. This
entity has no assets of its own. It had no income or
expenses during the period under report. BMW AG
bears expenses on an immaterial scale and performs
services for BMW Trust e. V., Munich.
For disclosures relating to key management personnel,
note 43 and the Compensation Report.
please see
see
note 43
182
Notes to the Group
Financial Statements
Other Disclosures
see
note 31
41
Share-based remuneration
The BMW Group provides three share-based pro-
grammes: the Employee Share Programme for enti-
tled employees of the BMW Group, a share-based
remuneration programme for members of the Board
of Management and a share-based remuneration pro-
gramme for senior heads of department of BMW AG.
As part of the Employee Share Programme, non-voting
shares of preferred stock in BMW AG were granted in
2018 to qualifying employees at favourable conditions
(see
note 31 for the number and price of issued
shares). The holding period for these shares is up
to 31 December 2021. In the financial year 2018,
the BMW Group recorded a personnel expense of
€ 10 million (2017: € 10 million) for the Employee Share
Programme, corresponding to the difference between
the market price and the reduced price of the shares
of preferred stock purchased by employees. The Board
of Management reserves the right to decide anew each
year with respect to an Employee Share Programme.
For financial years beginning after 1 January 2011,
BMW AG has added a share-based remuneration
component to the existing compensation system for
Board of Management members. This compensation
component was revised for financial years from 2018
onwards.
Members of the Board of Management continue to
receive a cash compensation for the specific purpose
of investment after tax and contributions in BMW AG
common stock. For financial years from 2018 onwards,
the investment component corresponds to 45 % of the
gross bonus. Shares of common stock purchased in
this way by Board members are required to be held for
a period of four years. At the end of the holding period,
Board members receive from BMW AG, for every three
shares of common stock held, either one additional
share of common stock or the cash equivalent, to be
decided at BMW AG’s discretion. In the event of death
or invalidity, special rules apply for early payment
of share-based remuneration components based on
the target amounts. Insofar the service contract is
prematurely terminated and the Company has an
extraordinary right of termination, or if the Board
member resigns without the Company’s agreement,
entitlements to amounts as yet unpaid relating to
share-based remuneration are forfeited. With effect
from the financial year 2012, qualifying senior heads
of department are also entitled to select a share-based
remuneration component, which is largely comparable
to the share-based remuneration arrangements for
Board of Management members.
The share-based remuneration component is measured
at its fair value at each balance sheet date between
grant and settlement date, and on the settlement date.
The amounts are recognised as personnel expense
on a straight-line basis over the vesting period and
reported in the balance sheet as a provision.
The cash-settlement obligation for the share-based
remuneration component is measured at its fair value at
the balance sheet date (based on the closing price of
BMW AG common stock in Xetra trading at 31 Decem-
ber 2018).
The total carrying amount of the provision for the
share-based remuneration component of current
and former Board of Management members and
senior heads of department at 31 December 2018 was
€ 4,745,518 (2017: € 6,301,785).
The total expense recognised in 2018 for the share-
based remuneration component of current and former
Board of Management members and senior heads of
department was € 609,890 (2017: € 1,642,936).
The fair value of the programmes for Board of Man-
agement members and senior heads of department
at the date of grant of the share-based remuneration
components was € 1,919,680 (2017: € 2,311,946), based
on a total of 22,245 shares (2017: 25,694 shares) of
BMW AG common stock or a corresponding cash-
based settlement measured at the relevant market
share price prevailing on the grant date.
Further details on the remuneration of the Board
of Management are provided in the Compensation
Report for the financial year 2018.
42
Declaration with respect to the Corporate
Governance Code
The Board of Management and the Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft have
issued the prescribed Declaration of Compliance pur-
suant to § 161 of the German Stock Corporation Act.
It is reproduced in the Annual Report 2018 of the
BMW Group and is also available to shareholders on
the BMW Group website at
www.bmwgroup.com .
Group Financial Statements
183
the Supervisory Board of BMW AG or its subsidiaries,
nor were any contingent liabilities entered into on
their behalf.
Further details about the remuneration of current
members of the Board of Management and the
Supervisory Board can be found in the Compensation
Report, which is part of the Combined Management
Report.
44
Events after the end of the reporting period
No events have occurred since the end of the financial
year which could have a major impact on the results
of operations, financial position and net assets of
BMW AG and the BMW Group.
43
Compensation of members of the Board of
Management and Supervisory Board
The total compensation of the current members of
the Board of Management and the Supervisory Board
of BMW AG expensed for the financial year 2018 in
accordance with IFRS comprised the following:
in € million
2018
2017
Compensation to members of the
Board of Management
Fixed remuneration
Variable remuneration
thereof Performance Cash Plan
Share-based remuneration component
Allocation to pension provisions
Benefits in conjunction with the
termination of board activity
Compensation to members of the
Supervisory Board
Fixed compensation and attendance fees
Variable compensation
Total expense
thereof due within one year
28.8
8.2
20.3
5.3
0.3
3.4
3.9
5.6
2.0
3.6
41.7
30.7
40.2
7.7
31.7
–
0.8
3.1
0.9
5.6
2.0
3.6
49.8
45.9
With effect from the financial year 2018, variable cash
compensation includes a multi-year and future-oriented
Performance Cash Plan.
The total remuneration of former members of the
Board of Management and their dependants amounted
to € 9.2 million (2017: € 6.7 million).
Pension obligations to current members of the Board
of Management are covered by provisions amounting
to € 19.7 million (2017: € 22.0 million), determined
in accordance with IAS 19. Pension obligations to
former members of the Board of Management and
their surviving dependants, also determined in
accordance with IAS 19, amounted to € 91.0 million
(2017: € 90.1 million).
The compensation arrangements applicable for
members of the Supervisory Board for the financial
year 2018 do not include any stock options, value
appreciation rights comparable to stock options or
any other stock-based compensation components.
Apart from vehicle lease and financing contracts at
customary conditions, no advances or loans were
granted to members of the Board of Management and
SEGMENT INFORMATION
184
Notes to the Group
Financial Statements
Segment Information
45
Explanatory notes to segment information
Information on reportable segments
For the purposes of presenting segment information,
the activities of the BMW Group are divided into oper-
ating segments in accordance with IFRS 8 (Operating
Segments). The segmentation follows the internal
management and reporting system and takes account
of the organisational structure of the BMW Group
based on the various products and services of the
reportable segments.
The activities of the BMW Group are broken down
into the operating segments Automotive, Motorcycles,
Financial Services and Other Entities.
Within the Automotive segment the BMW Group devel-
ops, manufactures, assembles and sells automobiles
and off-road vehicles, under the brands BMW, MINI
and Rolls-Royce as well as spare parts, accessories
and mobility services. BMW and MINI brand products
are sold in Germany through branches of BMW AG
and by independent, authorised dealerships. Sales
outside Germany are handled mainly by subsidiary
companies and by independent import companies in
some markets. Rolls-Royce brand vehicles are sold in
the USA as well as in China, Korea, Italy and Russia via
subsidiary companies and elsewhere by independent,
authorised dealerships.
Activities relating to the development, manufacture,
assembly and sale of motorcycles as well as spare
parts and accessories are reported in the Motorcycles
segment.
Automobile leasing, fleet business, multi-brand
business, retail and dealership financing, customer
deposit business and insurance activities are the main
activities allocated to the Financial Services segment.
Holding and Group financing companies are reported in
the Other Entities segment. This segment also includes
the operating companies BMW (UK) Investments Ltd.
and Bavaria Lloyd Reisebüro GmbH, which are not
allocated to one of the other segments.
Internal management and reporting
Segment information is prepared as a general rule
in conformity with the accounting policies adopted
for preparing and presenting the Group Financial
Statements. Exceptions to this general principle are
the treatment of inter-segment guarantees, the earn-
ings impact of which is allocated to the Automotive
and Financial Services segments on the basis used
internally to manage the business, and cross-segment
receivables and investments in subsidiaries for which
no impairment losses have been recognised. A further
exception is the treatment of intragroup buyback
arrangements between the Automotive and Financial
Services segments. Inter-segment receivables and
payables, provisions, income, expenses and profits
are eliminated upon consolidation. Inter-segment
revenues are based on market prices. Centralised
functions are included in the segments concerned.
Expenses for centralised administrative functions
allocated to the Financial Services segment are not
settled in cash.
The role of “chief operating decision maker” with
respect to resource allocation and performance
assessment of the reportable segment is embodied
in the full Board of Management. For this purpose,
different measures of segment performance as well as
segment assets are taken into account in the operating
segments.
Group Financial Statements
185
The Automotive and Motorcycles segments are
managed on the basis of return on capital employed
(RoCE). The relevant measure of segment results used
is therefore profit before financial result. Capital
employed is the corresponding measure of segment
assets used to determine how to allocate resources
and comprises all current and non-current operational
assets after deduction of liabilities used operationally
which are not subject to interest (e. g. trade payables).
The success of the Financial Services segment is mea-
sured on the basis of return on equity (RoE). Profit
before tax therefore represents the relevant measure
of segment earnings. The measure of segment assets
in the Financial Services segment corresponds to net
assets, defined as total assets less total liabilities.
The success of the Other Entities segment is assessed
on the basis of profit or loss before tax. The corre-
sponding measure of segment assets used to manage
the Other Entities segment is total assets less asset-
side income tax items and intragroup investments.
186
Notes to the Group
Financial Statements
Segment Information
Segment information by operating segment is as
follows:
in € million
2018
2017*
2018
2017*
2018
2017
2018
2017
2018
2017*
2018
2017*
Automotive
Motorcycles
Financial Services
Other Entities
Reconciliation to Group figures
Group
SeGMent InforMAtIon
by operAtInG SeGMent
External revenues
Inter-segment revenues
Total revenues
Segment result
Result from equity accounted investments
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
in € million
Segment assets
Investments accounted for using the equity method
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
68,947
16,899
85,846
6,182
632
7,853
4,982
70,152
15,590
85,742
7,888
739
6,972
4,699
2,176
– 3
2,173
175
–
147
97
2,270
2
2,272
207
–
125
88
26,355
1,810
28,165
2,161
–
24,608
9,962
25,857
1,710
27,567
2,207
–
25,024
9,992
Automotive
Motorcycles
Financial Services
Other Entities
Reconciliation to Group figures
Group
31. 12. 2018
31. 12. 2017*
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017*
31. 12. 2018
31. 12. 2017*
13,836
2,624
11,223
2,769
618
–
618
–
14,919
14,740
–
–
84,512
75,121
95,095
93,804
208,980
195,506
Segment assets
–
–
2,624
2,769
Investments accounted for using the equity method
–
97,480
98,282
– 18,710
– 17,306
–
–
– 18,710
– 17,306
97,480
98,282
SeGMent InforMAtIon
by operAtInG SeGMent
External revenues
Inter-segment revenues
Total revenues
– 45
80
1,342
293
–
– 6,728
– 6,324
9,815
632
26,434
8,441
10,675
739
25,393
8,455
Segment result
Result from equity accounted investments
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
2
4
6
–
–
–
–
–
–
– 6,174
– 6,600
3
4
7
–
–
–
–
Group Financial Statements 187
in € million
2018
2017*
2018
2017*
2018
2017
2018
2017
2018
2017*
2018
2017*
Automotive
Motorcycles
Financial Services
Other Entities
Reconciliation to Group figures
Group
SeGMent InforMAtIon
by operAtInG SeGMent
External revenues
Inter-segment revenues
Total revenues
Segment result
Result from equity accounted investments
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
in € million
Segment assets
Investments accounted for using the equity method
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
68,947
16,899
85,846
6,182
632
7,853
4,982
70,152
15,590
85,742
7,888
739
6,972
4,699
2,176
– 3
2,173
175
–
147
97
2,270
2
2,272
207
–
125
88
26,355
1,810
28,165
2,161
–
24,608
9,962
25,857
1,710
27,567
2,207
–
25,024
9,992
2
4
6
– 45
–
–
–
3
4
7
80
–
–
–
–
–
97,480
98,282
– 18,710
– 17,306
–
–
– 18,710
– 17,306
97,480
98,282
1,342
–
– 6,174
– 6,600
293
–
– 6,728
– 6,324
9,815
632
26,434
8,441
10,675
739
25,393
8,455
SeGMent InforMAtIon
by operAtInG SeGMent
External revenues
Inter-segment revenues
Total revenues
Segment result
Result from equity accounted investments
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
Automotive
Motorcycles
Financial Services
Other Entities
Reconciliation to Group figures
Group
31. 12. 2018
31. 12. 2017*
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017
31. 12. 2018
31. 12. 2017*
31. 12. 2018
31. 12. 2017*
13,836
2,624
11,223
2,769
618
–
618
–
14,919
14,740
–
–
84,512
75,121
95,095
93,804
208,980
195,506
Segment assets
–
–
–
–
2,624
2,769
Investments accounted for using the equity method
188
Notes to the Group
Financial Statements
Segment Information
Write-downs on inventories to their net realisable value
amounting to € 54 million (2017: € 36 million 1) were
recognised by the Automotive segment in the financial
year 2018. The reversal of impairment losses increased
the segment result of the Automotive segment by an
amount of € 22 million (2017: € 6 million).
The result of the Financial Services segment was
negatively impacted by impairment losses totalling
€ 302 million (2017: € 215 million) recognised on leased
products. Income from the reversal of impairment
losses on leased products amounted to € 118 million
(2017: € 11 million).
The Other Entities’ segment result includes interest
and similar income amounting to € 1,178 million (2017:
€ 1,110 million) and interest and similar expenses
amounting to € 1,145 million (2017: € 986 million).
The information disclosed for capital expenditure and
depreciation and amortisation relates to non-current
property, plant and equipment, intangible assets and
leased products.
The total of the segment figures can be reconciled to
the corresponding Group figures as follows:
1 Prior year figure
has been adjusted.
in € million
2018
2017*
Reconciliation of segment result
Total for reportable segments
8,473
10,382
Financial result of Automotive segment
Financial result of Motorcycles segment
Elimination of inter-segment items
795
– 6
553
829
– 2
– 534
Group profit before tax
9,815
10,675
Reconciliation of capital expenditure
on non-current assets
Total for reportable segments
Elimination of inter-segment items
32,608
– 6,174
32,121
– 6,728
Total Group capital expenditure
on non-current assets
26,434
25,393
Reconciliation of depreciation and
amortisation on non-current assets
Total for reportable segments
Elimination of inter-segment items
15,041
– 6,600
14,779
– 6,324
Total Group depreciation and
amortisation on non-current assets
8,441
8,455
in € million
31. 12. 2018
31. 12. 2017*
Reconciliation of segment assets
Total for reportable segments
113,885
101,702
Non-operating assets – Automotive
48,639
47,933
Liabilities of Automotive segment
not subject to interest
Non-operating assets – Motorcycles
Liabilities of Motorcycles segment
not subject to interest
Total liabilities –
Financial Services segment
Non-operating assets –
Other Entities segment
34,643
34,489
45
613
40
572
131,889
123,088
7,084
7,829
Elimination of inter-segment items
– 127,818
– 120,147
Total Group assets
208,980
195,506
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
Group Financial Statements The reconciliation of segment figures to the corre-
sponding total Group figures shows the elimination
of inter-segment items. Revenues with other segments
result mainly from the sale of vehicles, for which the
Financial Services segment has concluded a financing
or lease contract. Eliminations of inter-segment items
in the reconciliation to the Group profit before tax,
capital expenditure, depreciation and amortization
mainly result from the sale of vehicles in the Automo-
tive segment, which are subsequently accounted for
as leased vehicles in the Financial Services segment.
In the reconciliation of segment assets to Group assets,
eliminations relate mainly to intragroup financing
balances.
In the information by region, external sales are based
on the location of the customer. Revenues with major
customers were not material overall. The information
disclosed for non-current assets relates to property,
plant and equipment, intangible assets and leased
products. Eliminations disclosed for non-current
assets relate to leased products.
189
Information by region
in € million
Germany
China
USA
Rest of Europe
Rest of Asia
Rest of the Americas
Other regions
Eliminations
Group
* Prior year figures adjusted due to first-time application of IFRS 15, see note 6.
External revenues
Non-current assets
2018
2017*
2018
2017*
13,596
19,008
16,088
31,415
11,071
3,606
2,696
–
14,299
18,268
16,726
30,925
11,400
3,689
2,975
–
97,480
98,282
34,883
90
21,361
15,526
1,508
3,435
396
– 7,855
69,344
31,678
85
20,766
14,807
1,588
2,941
355
– 8,028
64,192
190
Notes to the Group
Financial Statements
List of Investments
at 31 December 2018
LIST OF INVESTMENTS AT
31 DECEMBER 2018
46
List of investments at 31 December 2018
The List of Investments of BMW AG pursuant to § 285
and § 313 HGB is presented below. Disclosures for
equity and earnings and for investments are not made
if they are of “minor significance” for the results of
operations, financial position and net assets of
BMW AG pursuant to § 286 (3) sentence 1 no. 1 HGB
and § 313 (3) sentence 4 HGB. It is also shown in the list
which subsidiaries apply the exemptions available in
§ 264 (3) and § 264 b HGB with regard to the publication
of annual financial statements and the drawing up of
a management report and / or notes to the financial
statements (footnotes 5 and 6). The Group Financial
Statements of BMW AG serve as exempting consoli-
dated financial statements for these companies.
Affiliated companies (subsidiaries) of BMW AG at 31 December 2018
• 76
Companies
DoMESTIc 1
BMW Beteiligungs GmbH & Co. KG, Munich 6
BMW INTEC Beteiligungs GmbH, Munich 3, 6
BMW Bank GmbH, Munich 3
BMW Finanz Verwaltungs GmbH, Munich
BMW Verwaltungs GmbH, Munich 3, 6
Parkhaus Oberwiesenfeld GmbH, Munich
Alphabet Fuhrparkmanagement GmbH, Munich 4
Alphabet International GmbH, Munich 4, 5, 6
BMW High Power Charging Beteiligungs GmbH, Munich 4, 6
DriveNow GmbH & Co. KG, Munich 11
BMW Hams Hall Motoren GmbH, Munich 4, 5, 6
BMW Fahrzeugtechnik GmbH, Eisenach 3, 5, 6
BMW Anlagen Verwaltungs GmbH, Munich 3, 6
Bürohaus Petuelring GmbH, Munich
Bavaria Wirtschaftsagentur GmbH, Munich 3, 5, 6
BAVARIA-LLOYD Reisebüro GmbH, Munich
Rolls-Royce Motor Cars GmbH, Munich 4, 5, 6
BMW Vermögensverwaltungs GmbH, Munich
BMW Vertriebszentren Verwaltungs GmbH, Munich
BMW M GmbH Gesellschaft für individuelle Automobile, Munich 3, 5, 6
DriveNow Verwaltungs GmbH, Munich 11
LARGUS Grundstücks-Verwaltungsgesellschaft mbH, Munich
FoREIGn 2
Europe 12
BMW Holding B. V., The Hague
BMW International Holding B. V., Rijswijk 10
BMW Österreich Holding GmbH, Steyr
BMW (UK) Holdings Ltd., Farnborough
BMW España Finance S. L., Madrid
BMW Financial Services (GB) Ltd., Farnborough
BMW Motoren GmbH, Steyr
BMW (Schweiz) AG, Dielsdorf
BMW International Investment B. V., The Hague
BMW (UK) Manufacturing Ltd., Farnborough
Equity
in € million
Profit / loss
in € million
Capital invest-
ment in %
5,497
3,558
1,988
326
153
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 13
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,761
2,106
7,971
3,064
1,889
1,020
1,014
963
895
588
561
58
838
385
22
269
176
55
9
105
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Group Financial Statements
BMW Finance S. N. C., Guyancourt
BMW Italia S. p. A., San Donato Milanese
BMW Belgium Luxembourg S. A. / N. V., Bornem
BMW (UK) Ltd., Farnborough
ALPHABET (GB) Ltd., Farnborough
BMW France S. A. S., Montigny-le-Bretonneux
BMW Financial Services Scandinavia AB, Sollentuna
BMW i Ventures SCS SICAV-RAIF, Senningerberg
BMW Iberica S. A., Madrid
BMW Finance N. V., The Hague
Rolls-Royce Motor Cars Ltd., Farnborough
BMW Russland Trading OOO, Moscow
BMW Austria Leasing GmbH, Salzburg
Alphabet Nederland B. V., Breda 10
BMW Austria Bank GmbH, Salzburg
BMW Vertriebs GmbH, Salzburg
Alphabet Belgium Long Term Rental NV, Aartselaar
APD Industries plc, Birmingham
BMW Malta Ltd., Floriana
Alphabet UK Ltd., Glasgow
BMW Austria GmbH, Salzburg
Bavaria Reinsurance Malta Ltd., Floriana
BMW Finanzdienstleistungen (Schweiz) AG, Dielsdorf
BMW Bank OOO, Moscow
BMW Financial Services Belgium S. A. / N. V., Bornem
BMW Northern Europe AB, Stockholm
Alphabet España Fleet Management S. A. U., Madrid
BMW Norge AS, Fornebu
BMW Financial Services B. V., Rijswijk
Swindon Pressings Ltd., Farnborough
BMW Services Ltd., Farnborough
BMW Financial Services Polska Sp. z o. o., Warsaw
Alphabet Italia Fleet Management S. p. A., Rome
Alphabet Austria Fuhrparkmanagement GmbH, Salzburg
Alphabet France Fleet Management S. N. C., Rueil-Malmaison
BMW Retail Nederland B. V., The Hague
BMW Hellas Trade of Cars A. E., Kifissia
Alphabet Fuhrparkmanagement (Schweiz) AG, Dielsdorf
BMW Financial Services (Ireland) DAC, Dublin
BMW Portugal Lda., Porto Salvo
BMW Financial Services Denmark A / S, Copenhagen
BMW Nederland B. V., Rijswijk
BMW Amsterdam B. V., Amsterdam
BMW Automotive (Ireland) Ltd., Dublin
BMW Distribution S. A. S., Vélizy-Villacoublay
Park Lane Ltd., Farnborough
BMW Renting (Portugal) Lda., Porto Salvo
Alphabet France S. A. S., Rueil-Malmaison
Oy BMW Suomi AB, Helsinki
BMW Services Belgium N. V., Bornem
BMW Czech Republic s. r. o., Prague 11
BMW Roma S. r. l., Rome
BMW Danmark A / S, Copenhagen
BMW Den Haag B. V., The Hague
191
476
388
316
304
284
225
222
218
213
205
195
157
156
129
128
123
101
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57
61
16
84
64
27
11
43
19
19
71
75
20
29
16
19
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
192
Notes to the Group
Financial Statements
List of Investments
at 31 December 2018
BMW Madrid S. L., Madrid
Alphabet Polska Fleet Management Sp. z o. o., Warsaw
BMW Slovenská republika s. r. o., Bratislava 11
Société Nouvelle WATT Automobiles S. A. R. L., Rueil-Malmaison
BMW Milano S. r. l., Milan
Alphabet Luxembourg S. A., Leudelange
BMW (UK) Investments Ltd., Farnborough
DriveNow Sverige AB, Sollentuna 11
DriveNow Austria GmbH, Vienna 11
BMW Coordination Center V. o. F., Bornem
BiV Carry I SCS, Senningerberg
BMW (UK) Capital plc, Farnborough
Riley Motors Ltd., Farnborough
BMW Central Pension Trustees Ltd., Farnborough
Triumph Motor Company Ltd., Farnborough
BLMC Ltd., Farnborough
DriveNow Belgium S. p. r. l., Brussels 11
DriveNow Italy S. r. l., Milan 11
DriveNow UK Ltd., London 11
Bavarian Sky S. A., Compartment German Auto Loans 4, Luxembourg 13
Bavarian Sky S. A., Compartment German Auto Loans 5, Luxembourg 13
Bavarian Sky S. A., Compartment German Auto Loans 6, Luxembourg 13
Bavarian Sky S. A., Compartment German Auto Loans 7, Luxembourg 13
Bavarian Sky S. A., Compartment German Auto Loans 8, Luxembourg 13
Bavarian Sky S. A., Compartment A, Luxembourg 13
Bavarian Sky S. A., Compartment B, Luxembourg 13
Bavarian Sky Europe S. A. Compartment A, Luxembourg 13
Bavarian Sky Europe S. A., Compartment Swiss Auto Leases 2, Luxembourg 13
Bavarian Sky FTC, Compartment French Auto Leases 2, Paris 13
Bavarian Sky FTC, Compartment French Auto Leases 3, Paris 13
Bavarian Sky UK 1 plc, London 13
Bavarian Sky UK 2 plc, London 13
Bavarian Sky UK A Ltd., London 13
Bavarian Sky UK B Ltd., London 13
The Americas
BMW (US) Holding Corp., Wilmington, Delaware
BMW Manufacturing Co. LLC, Wilmington, Delaware
Financial Services Vehicle Trust, Wilmington, Delaware
BMW Bank of North America Inc., Salt Lake City, Utah
BMW Canada Inc., Richmond Hill, Ontario
BMW US Capital LLC, Wilmington, Delaware
BMW Financial Services NA LLC, Wilmington, Delaware
BMW do Brasil Ltda., Joinville
BMW of North America LLC, Wilmington, Delaware
BMW Financeira S. A. Credito, Financiamento e Investimento, São Paulo
BMW de Mexico S. A. de C. V., Mexico City
BMW Financial Services de Mexico S. A. de C. V. SOFOM, Mexico City
BMW of Manhattan, Inc., Wilmington, Delaware
BMW SLP, S. A. de C. V., Villa de Reyes
BMW de Argentina S. A., Buenos Aires
BMW Insurance Agency Inc., Wilmington, Delaware
BMW Leasing de Mexico S. A. de C. V., Mexico City
BMW Leasing do Brasil S. A., São Paulo
Rolls-Royce Motor Cars NA LLC, Wilmington, Delaware
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,991
1,817
1,530
1,445
513
228
190
175
2,599
270
340
164
134
– 35
85
– 24
– 116
2,670
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Group Financial Statements BMW Consolidation Services Co. LLC, Wilmington, Delaware
BMW Acquisitions Ltda., São Paulo
BMW Manufacturing Indústria de Motos da Amazônia Ltda., Manaus
SB Acquisitions LLC, Wilmington, Delaware
BMW Auto Leasing LLC, Wilmington, Delaware
BMW Facility Partners LLC, Wilmington, Delaware
BMW FS Securities LLC, Wilmington, Delaware
BMW FS Funding Corp., Wilmington, Delaware
BMW Manufacturing LP, Woodcliff Lake, New Jersey
BMW FS Receivables Corp., Wilmington, Delaware
BMW Receivables 1 Inc., Richmond Hill, Ontario
BMW Receivables Ltd. Partnership, Richmond Hill, Ontario
BMW Receivables 2 Inc., Richmond Hill, Ontario
BMW Extended Service Corp., Wilmington, Delaware
BMW Vehicle Lease Trust 2016-2, Wilmington, Delaware 13
BMW Vehicle Lease Trust 2017-1, Wilmington, Delaware 13
BMW Vehicle Lease Trust 2017-2, Wilmington, Delaware 13
BMW Vehicle Lease Trust 2018-1, Wilmington, Delaware 13
BMW Vehicle Lease Trust 2017-A, Wilmington, Delaware 13
BMW Vehicle Owner Trust 2016-A, Wilmington, Delaware 13
BMW Vehicle Owner Trust 2018-A, Wilmington, Delaware 13
BMW Floorplan Master Owner Trust Series 2018-1, Wilmington, Delaware 13
BMW Canada 2015-A, Richmond Hill, Ontario 13
BMW Canada 2018-A, Richmond Hill, Ontario 13
BMW Canada Auto Trust 2016, Richmond Hill, Ontario 13
BMW Canada Auto Trust 2017-1, Richmond Hill, Ontario 13
BMW Canada Auto Trust 2018-1, Richmond Hill, Ontario 13
Africa
BMW (South Africa) (Pty) Ltd., Pretoria
BMW Financial Services (South Africa) (Pty) Ltd., Midrand
SuperDrive Investments (RF) Ltd., Cape Town 13
Asia
BMW Automotive Finance (China) Co. Ltd., Beijing
BMW China Automotive Trading Ltd., Beijing
BMW Financial Services Korea Co. Ltd., Seoul
BMW Japan Finance Corp., Tokyo
BMW Japan Corp., Tokyo
Herald International Financial Leasing Co., Ltd., Tianjin
BMW Korea Co. Ltd., Seoul
BMW India Financial Services Private Ltd., Gurgaon, Haryana
BMW (Thailand) Co. Ltd., Bangkok
BMW Manufacturing (Thailand) Co. Ltd., Rayong
BMW Malaysia Sdn Bhd, Kuala Lumpur
BMW Leasing (Thailand) Co. Ltd., Bangkok
BMW China Services Ltd., Beijing
BMW Holding Malaysia Sdn Bhd, Kuala Lumpur
BMW India Private Ltd., Gurgaon
BMW Asia Technology Centre Sdn Bhd, Kuala Lumpur
BMW Asia Pte. Ltd., Singapore
PT BMW Indonesia, Jakarta
BMW Asia Pacific Capital Pte Ltd., Singapore
BMW Credit (Malaysia) Sdn Bhd, Kuala Lumpur
BMW Lease (Malaysia) Sdn Bhd, Kuala Lumpur
193
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
719
149
–
2,107
557
530
482
337
197
173
123
108
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
63
4
–
248
480
47
62
93
13
27
7
87
–
–
–
–
–
–
–
–
–
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
0
0
0
0
0
0
0
0
0
0
0
0
100
100
0
58
100
100
100
100
58
100
100
100
100
51
74
100
100
100
100
100
100
100
100
100
194
Notes to the Group
Financial Statements
List of Investments
at 31 December 2018
BMW Tokyo Corp., Tokyo
2015-1 ABL, Tokyo 13
2015-2 ABL, Tokyo 13
2016-1 ABL, Tokyo 13
2016-2 ABL, Tokyo 13
2017-1 ABL, Tokyo 13
2017-2 ABL, Tokyo 13
2017-3 ABL, Tokyo 13
2018-1 ABL, Tokyo 13
2018-2 ABL, Tokyo 13
2018-3 ABL, Tokyo 13
Bavarian Sky Korea 2nd Asset Securitization Speciality Company, Seoul 13
Bavarian Sky Korea 3rd Asset Securitization Speciality Company, Seoul 13
Bavarian Sky China 2017-2, Beijing 13
Bavarian Sky China 2017-3, Beijing 13
Bavarian Sky China 2018-1, Beijing 13
Bavarian Sky China 2018-2, Beijing 13
Oceania
BMW Australia Finance Ltd., Mulgrave
BMW Australia Ltd., Melbourne
BMW Financial Services New Zealand Ltd., Auckland
BMW New Zealand Ltd., Auckland
BMW Sydney Pty. Ltd., Sydney
BMW Melbourne Pty. Ltd., Melbourne
BMW Australia Trust 2011-2, Mulgrave 13
Bavarian Sky Australia Trust A, Mulgrave 13
BMW AG’s non-consolidated companies at 31 December 2018
• 77
Companies
DoMESTIc 7
Alphabet Fleetservices GmbH, Munich
Automag GmbH, Munich
Blitz 18-353 GmbH, Munich
Blitz 18-354 GmbH, Munich
BMW Car IT GmbH, Munich 4
BMW i Ventures GmbH, Munich
Digital Charging Solutions GmbH, Munich
ParkNow GmbH, Munich
PM Parking Ventures GmbH, Munich
FoREIGn 7
Europe
Alphabet Insurance Services Polska Sp. z o. o., Warsaw
BMW (GB) Ltd., Farnborough
BMW (UK) Pensions Services Ltd., Hams Hall
BMW Bulgaria EOOD, Sofia
BMW Car Club Ltd., Farnborough
BMW Drivers Club Ltd., Farnborough
BMW Group Benefit Trust Ltd., Farnborough
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
403
179
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27
53
–
–
–
–
–
–
100
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100
100
100
100
100
100
0
0
Equity
in € million
Profit / loss
in € million
Capital invest-
ment in %
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Group Financial Statements BMW i Ventures B. V., The Hague
BMW Manufacturing Hungary Kft., Vecsés
BMW Merger S. R. L., Bukarest
BMW Merger, distribucija motornih vozil, d. o. o., Ljubljana
BMW Motorsport Ltd., Farnborough
BMW Russland Automotive OOO, Kaliningrad
Cobalt Holdings Ltd., Basingstoke
Cobalt Telephone Technologies Ltd., Basingstoke
Content4all B. V., Amsterdam
John Cooper Garages Ltd., Farnborough
John Cooper Works Ltd., Farnborough
OOO BMW Leasing, Moscow
Park-line Aqua B. V., The Hague
Park-line B. V., The Hague
Park-line Holding B. V., The Hague
Park-Mobile (UK) Ltd., Basingstoke
Parkmobile Belgium BvBa, Antwerp
Parkmobile Benelux B. V., Amsterdam
Parkmobile Group B. V., Amsterdam
Parkmobile Group Holding B. V., Amsterdam
Parkmobile Hellas S. A., Athens
Parkmobile International B. V., Amsterdam
Parkmobile International Holding B. V., Amsterdam
Parkmobile Licenses B. V., Amsterdam
Parkmobile Ltd., Basingstoke
Parkmobile Software B. V., Amsterdam
ParkNow Austria GmbH, Vienna
ParkNow France S. A. S., Versailles
ParkNow Suisse S. A., Bulle
RingGo (GB) Ltd., Basingstoke
U. T. E. Alphabet España-Bujarkay, Sevilla
The Americas
217-07 Northern Boulevard Corp., Wilmington, Delaware
BMW Experience Centre Inc., Richmond Hill, Ontario
BMW i Ventures Inc., Wilmington, Delaware
BMW i Ventures LLC, Wilmington, Delaware
BMW Leasing de Argentina S. A., Buenos Aires
BMW Operations Corp., Wilmington, Delaware
BMW Technology Corp., Wilmington, Delaware
Designworks / USA Inc., Newbury Park, California
Digital Charging Solution Corp., Atlanta, Georgia
MINI Business Innovation LLC, Wilmington, Delaware
Mini Urban X Accelerator SPV LLC, Wilmington, Delaware
Parkmobile Electronic Parking Solutions Canada Inc., Vancouver
Parkmobile Montgomery County LLC, Baltimore, Maryland
Parkmobile USA Inc., Atlanta, Georgia
Parkmobile LLC, Wilmington, Delaware
ParkNow LLC, Wilmington, Delaware
ReachNow LLC, Wilmington, Delaware
Toluca Planta de Automoviles S. A. de C. V., Mexico City
Africa
BMW Automobile Distributors (Pty) Ltd., Midrand
BPF Midrand Property Holdings (Pty) Ltd., Midrand
Multisource Properties (Pty) Ltd., Midrand
195
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
196
Notes to the Group
Financial Statements
List of Investments
at 31 December 2018
Asia
THEPSATRI Co. Ltd., Bangkok 9
BMW Financial Services Singapore Pte Ltd., Singapore
BMW Philippines Corp., Manila
BMW India Foundation, Gurgaon
BMW Hong Kong Services Ltd., Hongkong
BMW Insurance Services Korea Co. Ltd., Seoul
BMW Mobility Services Ltd., Sichuan Tianfu New Area (Chengdu Section)
BMW Finance (United Arab Emirates) Ltd., Dubai
BMW Middle East Retail Competency Centre DWC-LLC, Dubai
BMW India Leasing Private Ltd., Gurgaon
Herald Hezhong (Beijing) Automotive Trading Co. Ltd., Beijing
BMW Financial Services Hong Kong Ltd., Hongkong
Oceania
Parkmobile International (Australia) Pty. Ltd., Sydney
BMW AG’s associated companies, joint ventures
and joint operations at 31 December 2018
• 78
Companies
Associated companies – equity accounted
doMeStIC
IONITY Holding GmbH & Co. KG, Munich 8
foreIGn
BMW Brilliance Automotive Ltd., Shenyang 8
Joint operations – proportionately consolidated entities
foreIGn
THERE Holding B. V., Amsterdam 8
Not equity accounted or proportionately consolidated entities
DoMESTIc 7
Encory GmbH, Unterschleißheim
Digital Energy Solutions GmbH & Co. KG, Munich
The Retail Performance Company GmbH, Munich
PDB – Partnership for Dummy Technology and Biomechanics GbR, Gaimersheim
FoREIGn 7
Bavarian & Co. Ltd., Incheon
BMW Albatha Finance PSC, Dubai
BMW Albatha Leasing LLC, Dubai
BMW AVTOTOR Holding B. V., Amsterdam
Critical TW S. A., Porto
DSP Concepts Inc., Dover, Delaware
IP Mobile N. V., Brussels
Rever Moto Inc., Wilmington, Delaware
Stadspasparkeren B. V., Deurne
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49
100
70
100
100
100
100
100
100
100
100
51
100
Equity
in € million
Profit / loss
in € million
Capital invest-
ment in %
149
– 15
5,926
1,561
25
50
1,764
– 337
29.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50
50
50
20
20
40
40
50
51
20
25
20
30
Group Financial Statements BMW AG’s participations at 31 December 2018
• 79
Companies
DoMESTIc 7
Deutsches Forschungszentrum für Künstliche Intelligenz GmbH, Kaiserslautern
GSB Sonderabfall-Entsorgung Bayern GmbH, Baar-Ebenhausen
Hubject GmbH, Berlin
IVM Industrie-Verband Motorrad GmbH & Co. Dienstleistungs KG, Essen
Joblinge gemeinnützige AG Berlin, Berlin
Joblinge gemeinnützige AG Leipzig, Leipzig
Joblinge gemeinnützige AG München, Munich
Racer Benchmark Group GmbH, Landsberg am Lech
SGL Carbon SE, Wiesbaden
FoREIGn 7
Gios Holding B.V., Oss
SGL Composites LLC, Dover, Delaware
197
Equity
in € million
Profit / loss
in € million
Capital invest-
ment in %
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.6
3.1
17.8
18.9
9.8
16.7
6.2
9.1
18.3
12.0
49.0
1 The amounts shown for the German subsidiaries correspond to the annual financial statements drawn up in accordance with German accounting requirements (HGB).
2 The amounts shown for the foreign subsidiaries correspond to the annual financial statements drawn up in accordance with uniform IFRS rules. Equity and earnings not denominated in euro are translated into
euro using the closing exchange rate at the balance sheet date.
3 Profit and Loss Transfer Agreement with BMW AG.
4 Profit and Loss Transfer Agreement with a subsidiary of BMW AG.
5 Exemption from drawing up a management report applied in accordance with § 264 (3) and § 264 b HGB.
6 Exemption from publication of financial statements applied in accordance with § 264 (3) and § 264 b HGB.
7 These entities are neither consolidated nor accounted for using the equity method due to their overall immateriality for the Group Financial Statements.
8 The amounts shown for entities accounted for using the equity method and for proportionately consolidated entities correspond to the annual financial statements drawn up in accordance with uniform
IFRS rules. Equity not denominated in euro is translated into euro using the closing exchange rate at the balance sheet date, earnings are translated using the average rate.
9 Including power to appoint representative bodies.
10 Exemption pursuant to Article 2:403 of the Civil Code of the Netherlands (Burgerlijk Wetboek).
11 First-time consolidation.
12 Deconsolidation in the financial year 2018: BMW Malta Finance Ltd., St. Julians.
13 Control on basis of economic dependence.
198
Notes to the Group
Financial Statements
List of Investments
at 31 December 2018
Munich, 19 February 2019
Bayerische Motoren Werke
Aktiengesellschaft
The Board of Management
Harald Krüger
Milagros Caiña Carreiro-Andree Klaus Fröhlich
Pieter Nota
Dr. Nicolas Peter
Peter Schwarzenbauer
Dr.-Ing. Andreas Wendt
Oliver Zipse
Group Financial Statements CORPORATE
GOVERNANCE
Page 200 Statement on Corporate Governance
(Part of the Combined Management Report)
Information on the Company’s Governing Constitution
Page 200
Page 201 Declaration of the Board of Management and
of the Supervisory Board Pursuant to § 161 AktG
Page 202 Members of the Board of Management
Page 203 Members of the Supervisory Board
Page 206 Composition and Work Procedures of the Board of Management
of BMW AG and its Committees
Page 208 Composition and Work Procedures of the Super visory Board
of BMW AG and its Committees
Page 215 Disclosures Pursuant to the Act on Equal Gender Participation
Page 216
Information on Corporate Governance
Practices Applied beyond Mandatory Requirements
Page 218 Compliance in the BMW Group
Page 223 Compensation Report
(Part of the Combined Management Report)
Page 239 Responsibility Statement by the Company’s
Legal Representatives
Page 240
Independent Auditor’s Report
4
4
Corporate
Governance
Company’s Govern-
ing Constitution
Board of
Management
Supervisory Board
Compliance
Compensation
Report
200
Information on the
Company’s
Governing
Constitution
STATEMENT ON
CORPORATE
GOVERNANCE
Good corporate governance – acting in accordance
with the principles of responsible management aimed
at increasing the value of the business on a sustainable
basis – is an essential requirement for the BMW Group
embracing all areas of the business. Corporate culture
within the BMW Group is founded on transparent
reporting and communication, corporate governance
in the interest of all stakeholders, trustful cooperation
both of the Board of Management and the Supervisory
Board as well as among employees, and compliance
with applicable law. The Board of Management and
Supervisory Board report in this statement on impor-
tant aspects of corporate governance pursuant to
§§ 289 f, § 315 d HGB and section 3.10 of the German
Corporate Governance Code (GCGC).
Information on the Company’s
Governing Constitution
The designation BMW Group comprises Bayerische
Motoren Werke Aktiengesellschaft (BMW AG) and
its group entities. BMW AG is a stock corporation
(Aktiengesellschaft) within the meaning of the
German Stock Corporation Act (Aktiengesetz) and
has its registered office in Munich, Germany. It has
three representative bodies: the Annual General
Meeting, the Supervisory Board and the Board of
Management. The duties and powers of those bodies
derive from the Stock Corporation Act and the
Articles of Incorporation of BMW AG. Shareholders,
as the owners of the business, exercise their rights at
the Annual General Meeting. The Annual General
Meeting decides in particular on the utilisation of
unappropriated profit, the ratification of the acts of
the members of the Board of Management and the
Supervisory Board, the appointment of the external
auditor, changes to the Articles of Incorporation and
certain capital measures, and elects the shareholders’
representatives to the Supervisory Board. The Board of
Management is responsible for managing the Company
and is monitored and advised by the Supervisory
Board. The Supervisory Board appoints the members
of the Board of Management and can, for an important
reason, revoke an appointment at any time. The Board
of Management informs the Supervisory Board and
reports to it regularly, promptly and comprehensively,
in line with the principles of conscientious and faithful
accountability and in accordance with the law and the
reporting duties determined by the Supervisory Board.
The Board of Management requires the approval of
the Supervisory Board for certain major business
proceedings. The Supervisory Board is not, however,
authorised to undertake management measures itself.
The close interaction between Board of Management
and Supervisory Board in the interests of the Company
as described above is also known as a “two-tier board
structure”.
Statement on Corporate Governance Declaration of the Board of Management and the
Supervisory Board of Bayerische Motoren Werke
Aktiengesellschaft regarding the recommenda-
tions of the “Government Commission on the
German Corporate Governance Code” Pursuant
to § 161 German Stock Corporation Act
The Board of Management and the Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft
(“BMW AG”) declare the following regarding the
recommendations of the “Government Commission
on the German Corporate Governance Code”:
1. Since the last Declaration was issued in De -
cember 2017, BMW AG has complied with all the
re commendations published officially in the
Federal Gazette on 24 April 2017 (Code version
dated 7 February 2017) with the exception – as
previously reported – of section 4.2.3 sentence 9
and section 4.2.5 sentences 5 and 6.
2. In future, BMW AG will comply with all the re com-
mendations published officially in the Federal
Gazette on 24 April 2017 (Code version dated
7 February 2017), with the exception of section
4.2.5 sentences 5 and 6.
3. It is recommended in section 4.2.3 sentence 9 of
the Code that subsequent amendments to per-
formance targets or comparison parameters for
variable remuneration components relating to
the Board of Management shall be excluded. As
previously reported, this recommendation was
deviated from on a one-time basis in order to im-
plement the new compensation system with
effect from the financial year 2018, rather than
with effect from the financial year 2020. Accor-
dingly, it was necessary to cancel the targets
previously set for the variable remuneration com-
ponents for the financial years 2018 and 2019
and replace them for the financial year 2018 on-
wards with targets based on the new compen-
sation system. The recommendation will, however,
be complied with again in the future.
201
4. It is recommended in section 4.2.5 sentences 5
and 6 of the Code that specified information
pertaining to management board compensation
be disclosed in a Compensation Report. These
recommendations have not been and will not be
complied with, due to uncertainties as to whe ther
the additional disclosure of this information and
the use of model tables would add to the de-
sired transparency and understandability of the
BMW Group’s Compensation Report in ac cord-
ance with generally applicable financial report-
ing requirements (see section 4.2.5 sen tence 3
of the Code).
Furthermore, in its draft revision of the Code
dated 25 October 2018 (published on 6 Novem-
ber 2018), the Government Commission on the
German Corporate Governance Code has now
proposed to delete the aforementioned recom-
mendation, as the planned amendment to the
German Stock Corporation Act to implement the
second EU Shareholder Rights Directive con-
tains comprehensive and detailed requirements
for compensation reports, thus obviating the
need for recommendations in the Code. The cor-
responding amendments to the Code are due
to be made in the course of the financial year
2019. Continuity of reporting is therefore a fur-
ther argument for not using the model tables as
a one-off solution in the BMW Group’s Compen-
sation Report for the financial year 2018 prior
to the new statutory reporting requirements
coming into force.
Munich, December 2018
Bayerische Motoren Werke
Aktiengesellschaft
On behalf of the
Supervisory Board
On behalf of the
Board of Management
Dr.-Ing. Dr.-Ing. E. h.
Norbert Reithofer
Chairman
Harald Krüger
Chairman
202
Members of the
Board of
Management
Members of the
Supervisory Board
MEMBERS OF THE
BOARD OF MANAGEMENT
harald Krüger (*1965)
Chairman
Mandates
Deutsche Telekom AG (since 17 May 2018)
Milagros Caiña Carreiro-Andree (*1962)
Human Resources, Industrial Relations Director
Markus Duesmann (*1969)
Purchasing and Supplier Network
(until 24 July 2018)
Klaus fröhlich (*1960)
Development
Mandates
E.ON SE (since 9 May 2018)
HERE International B. V. (until 28 February 2018)
pieter nota (*1964)
Sales and Brand BMW, Aftersales BMW Group
dr. nicolas peter (*1962)
Finance
Mandates
BMW Brilliance Automotive Ltd.
(Deputy Chairman)
peter Schwarzenbauer (*1959)
MINI, Rolls-Royce, BMW Motorrad,
Customer Engagement and Digital Business
Innovation BMW Group
Mandates
Scout24 AG
Rolls-Royce Motor Cars Limited (Chairman)
dr.-Ing. Andreas wendt (*1958)
Purchasing and Supplier Network
(since 1 October 2018)
Mandates
Pöttinger Landtechnik GmbH
(Chairman, until 29 October 2018)
oliver Zipse (*1964)
Production
Mandates
BMW (South Africa) (Pty) Ltd. (Chairman)
BMW Motoren GmbH (Chairman)
General Counsel:
dr. Jürgen reul
Membership of other statutory supervisory boards.
Membership of equivalent national or foreign boards of business enterprises.
Statement on Corporate Governance 203
Dr. jur. Karl-Ludwig Kley (*1951)
Member since 2008
Deputy Chairman
Chairman of the Supervisory Board of E.ON SE
and of the Deutsche Lufthansa Aktiengesellschaft
Mandates
E.ON SE (Chairman)
Deutsche Lufthansa Aktiengesellschaft (Chairman)
Verizon Communications Inc. (until 3 May 2018)
christiane Benner 2 (*1968)
Member since 2014
Second Chairman of IG Metall
Mandates
Continental AG
(Deputy Chairman, since 1 March 2018)
Dr. rer. pol. Kurt Bock (*1958)
Member since 17 May 2018
Former Chairman of the Board of
Management of BASF SE
Mandates
Fresenius Management SE
Münchener Rückversicherungs-Gesellschaft
Aktiengesellschaft (since 25 April 2018)
Franz Haniel (*1955)
Member since 2004
Entrepreneur
Mandates
DELTON Health AG
(Deputy Chairman, until 31 December 2018)
Franz Haniel & Cie. GmbH (Chairman)
Heraeus Holding GmbH
TBG AG
Ralf Hattler 3 (*1968)
Member since 2017
Head of Purchasing Indirect Goods and Services,
Raw Material, Production Partner
MEMBERS OF THE
SUPERVISORY BOARD
Dr.-Ing. Dr.-Ing. E. h. norbert Reithofer (*1956)
Member since 2015
Chairman
Former Chairman of the Board of
Management of BMW AG
Mandates
Siemens Aktiengesellschaft
Henkel AG & Co. KGaA (Shareholders’ Committee)
Manfred Schoch 1 (*1955)
Member since 1988
Deputy Chairman
Chairman of the European
and General Works Council
Industrial Engineer
Stefan quandt (*1966)
Member since 1997
Deputy Chairman
Entrepreneur
Mandates
DELTON Health AG (Chairman)
DELTON Technology SE
(Chairman, since 19 November 2018)
AQTON SE (Chairman)
Entrust Datacard Corp.
Stefan Schmid 1 (*1965)
Member since 2007
Deputy Chairman
Chairman of the Works Council, Dingolfing
1 Employee representatives (company employees).
2 Employee representatives (union representatives).
3 Employee representatives (members of senior management).
Membership of other statutory supervisory boards.
Membership of equivalent national or foreign boards of business enterprises.
204
Members of the
Supervisory Board
dr.-Ing. heinrich hiesinger (*1960)
Member since 2017
Former Chairman of the Board of Management
of thyssenkrupp AG
Mandates
thyssenkrupp Elevator AG
(Chairman, until 6 July 2018)
thyssenkrupp Steel Europe AG
(Chairman, until 6 July 2018)
thyssenkrupp (China) Ltd.
(Chairman, until 6 July 2018)
prof. Dr. rer. nat. Dr. h. c. Reinhard Hüttl (*1957)
Member since 2008
Chairman of the Executive Board
of Helmholtz-Zentrum Potsdam
Deutsches GeoForschungsZentrum – GFZ
University Professor
Susanne Klatten (*1962)
Member since 1997
Entrepreneur
Mandates
ALTANA AG (Deputy Chairman)
SGL Carbon SE (Chairman)
UnternehmerTUM GmbH (Chairman)
prof. dr. rer. pol. renate Köcher (*1952)
Member since 2008
Director of Institut für Demoskopie
Allensbach Gesellschaft zum Studium der
öffentlichen Meinung mbH
Mandates
Infineon Technologies AG
Nestlé Deutschland AG
Robert Bosch GmbH
Dr. h. c. Robert W. Lane (*1949)
Member since 2009 until 17 May 2018
Former Chairman and Chief Executive Officer of
Deere & Company
Horst Lischka 2 (*1963)
Member since 2009
General Representative of IG Metall Munich
Mandates
KraussMaffei Group GmbH
MAN Truck & Bus AG
Städtisches Klinikum München GmbH
Willibald Löw 1 (*1956)
Member since 1999
Chairman of the Works Council, Landshut
Simone Menne (*1960)
Member since 2015
Member of supervisory boards
Mandates
Deutsche Post AG
Springer Nature AG & Co. KGaA
(since 23 April 2018)
Johnson Controls International plc
(since 7 March 2018)
Russell Reynolds Associates Inc.
(since 19 January 2019)
1 Employee representatives (company employees).
2 Employee representatives (union representatives).
3 Employee representatives (members of senior management).
Membership of other statutory supervisory boards.
Membership of equivalent national or foreign boards of business enterprises.
Statement on Corporate Governance
205
Dr. Dominique Mohabeer 1 (*1963)
Member since 2012
Member of the Works Council, Munich
Brigitte Rödig 1 (*1963)
Member since 2013
Member of the Works Council, Dingolfing
Jürgen Wechsler 2 (*1955)
Member since 2011
Former Regional Head of IG Metall Bavaria
Mandates
Schaeffler AG (Deputy Chairman)
Siemens Healthcare GmbH (Deputy Chairman)
Werner Zierer 1 (*1959)
Member since 2001
Chairman of the Works Council, Regensburg
1 Employee representatives (company employees).
2 Employee representatives (union representatives).
3 Employee representatives (members of senior management).
Membership of other statutory supervisory boards.
Membership of equivalent national or foreign boards of business enterprises.
206
Composition and
Work Procedures
of the Board of
Management of
BMW AG and its
Committees
COMPOSITION AND WORK
PROCEDURES OF THE
BOARD OF MANAGEMENT
OF BMW AG AND ITS
COMMITTEES
The Board of Management manages the enterprise
under its own responsibility, acting in the best inter-
ests of the BMW Group with the aim of achieving
sustainable growth in value. The interests of share-
holders, employees and other stakeholders are also
taken into account in the pursuit of this aim.
The Board of Management determines the strategic
orientation of the enterprise, agrees upon it with the
Supervisory Board and ensures its implementation.
The Board of Management is also responsible for
ensuring that all provisions of law and internal regula-
tions are complied with. Further details on compliance
within the BMW Group are available in the Corporate
Governance section of the Annual Report. The Board
of Management is also responsible for ensuring that
appropriate risk management and risk controlling
systems are in place throughout the Group.
During their period of employment for BMW AG, mem-
bers of the Board of Management are bound by a com-
prehensive non-competition clause. They are required to
act in the enterprise’s best interests and may not pursue
personal interests in their decisions or take advantage
of business opportunities intended for the benefit of
the enterprise. They may undertake ancillary activi-
ties, particularly supervisory board mandates outside
the BMW Group, only with the prior approval of the
Supervisory Board’s Personnel Committee. Individual
members of the Board of Management of BMW AG
are required to disclose any conflicts of interest to the
Supervisory Board without delay and inform the other
members of the Board of Management accordingly.
When a new member is appointed to the Board of Manage-
ment, the BMW Corporate Governance Officer is required
to inform that new member of the framework conditions
under which their duties are to be carried out – in par-
ticular those enshrined in the BMW Group’s Corporate
Governance Code – as well as the duty to cooperate when
a transaction or event triggers reporting requirements or
requires the approval of the Supervisory Board.
The Board of Management consults and takes decisions as
a collegiate body in meetings of the Board of Management,
the Sustainability Board, the Operations Committee and
the Committee for Executive Management Matters.
At its meetings, the Board of Management defines the
overall framework for developing business strategies
and the use of resources, takes decisions regarding
the implementation of strategies and deals with issues
of particular importance to the BMW Group. The full
Board also takes decisions at basic policy level relating
to the Group’s automobile product strategies and
product projects, inasmuch as these are relevant for
all of the Group’s brands. The Board of Management
and its committees may, as required and depending on
the subject matters being discussed, invite non-voting
advisers to participate at meetings.
Terms of procedure approved by the Board of Manage-
ment contain a plan for the allocation of divisional
responsibilities among the individual Board members.
These terms of procedure also incorporate the prin-
ciple that the full Board of Management bears joint
responsibility for all matters of particular importance
and scope. In addition, members of the Board of
Management manage the relevant portfolio of duties
under their responsibility, whereby case-by-case
rules can be put in place for cross-divisional projects.
Board members continually provide the Chairman
of the Board of Management with all the required
information pertaining to major transactions and
developments within their sphere of responsibility.
The Chairman of the Board of Management coordi-
nates cross-divisional matters with the overall targets
and plans of the BMW Group, involving other Board
members to the extent that divisions within their area
of responsibility are affected.
The Board of Management makes its decisions at meet-
ings which are convened, coordinated and headed by
the Chairman of the Board of Management. Generally,
two to three Board meetings were held per month
during the financial year 2018.
At the request of the Chairman, decisions can also be
taken outside of Board meetings if none of the Board
members object to this procedure. A meeting is quorate
if all Board of Management members are invited to the
meeting in good time. Members unable to attend any
particular meeting are entitled to vote in writing, by fax
or by telephone. Votes cast by telephone must be sub-
sequently confirmed in writing. Except in urgent cases,
matters relating to a division for which the responsible
Board member is not present will only be discussed and
decided upon with that member’s consent.
Unless stipulated otherwise by law or in BMW AG’s
statutes, the Board of Management makes decisions
based on a simple majority of votes cast at meetings.
Outside of Board meetings, decisions are taken on
the basis of a simple majority of Board members. In
the event of a tied vote, the Chairman of the Board
of Management has the casting vote. Any changes
to the Board’s terms of procedure must be passed
Statement on Corporate Governance 207
unanimously. A Board meeting may only be held if
more than half of the Board members are present.
In the event that the Chairman of the Board of
Management is not present or is unable to attend
a meeting, the member of the Board responsible for
Finance will represent him.
Minutes are taken of all meetings and of the Board of
Management’s resolutions and signed by the Chair-
man. Decisions taken by the Board of Management
are binding for all employees.
The rules relating to meetings and resolutions taken
by the full Board of Management are also applicable
for its committees.
Members of the Board of Management not represented
in a committee are provided with the agendas and
minutes of committee meetings. Committee matters
are dealt with in full Board meetings if the committee
considers it necessary or at the request of a member
of the Board of Management.
A secretariat for Board of Management matters has
been established to assist the Chairman and other
Board members with the preparation and follow-up
work connected with Board meetings.
The Operations Committee generally meets every
two weeks. At these meetings, decisions are reached
concerning automobile product projects, based on the
strategic orientation and decision-making framework
stipulated at Board of Management meetings. The
Operations Committee has three members who are
entitled to vote at meetings, namely the Board member
for Development (who also chairs the meetings), the
Board member for Production and the Board member
responsible for Purchasing and the Supplier Network.
Up to 28 February 2018, the Board member for Sales
and Brand BMW and Aftersales BMW Group as well
as the Board member for MINI, Rolls-Royce, BMW
Motorrad, Customer Engagement and Digital Business
Innovation BMW were also members of the Operations
Committee. If the committee chairman is not present
or unable to attend, meetings are chaired by the Board
member for Production. The Head of Corporate Qual-
ity as well as the Head of Maturity Management, Sign
Off and Product Validation participate in Operations
Committee meetings in an advisory capacity.
The full Board usually convenes up to twice a year
in its function as Sustainability Board in order to
define strategy and use of resources with regard to
sustainability and decide upon measures to imple-
ment that strategy. The Head of Corporate Affairs
and the Representative for Sustainability and Envi-
ronmental Protection participate in these meetings
in an advisory capacity.
The Board’s Committee for Executive Management
Matters deals with corporate issues affecting executive
managers of the BMW Group, either in their entirety or
individually (such as potential candidates for executive
management or nominations for senior management
positions). This committee has, firstly, an advisory and
preparatory role (e. g. in connection with fundamen-
tal issues relating to human resources policies, such
as compensation systems and planning, personnel
development and tools for assessing performance)
and secondly the function of a decision-making body
(e. g. the appointment of senior executives).
The Committee has two members who are entitled to
vote at meetings, namely the Chairman of the Board
of Management (who also chairs the meetings) and
the Board member for Human Resources. The Head
of Human Resources Management and Services as
well as the Head of Human Resources Executive
Management also participate in these meetings in
an advisory function. In addition, further participants
can be invited when needed for special topics. At
the request of the Chairman, resolutions may also
be passed outside of committee meetings by casting
votes in writing, by fax or by telephone if the other
member entitled to vote does not object immediately.
Normally, the Committee for Executive Management
Matters convenes between five and ten times a year.
The Board of Management is represented by its Chair-
man in its dealings with the Supervisory Board. The
Chairman of the Board of Management maintains regu-
lar contact with the Chairman of the Supervisory Board
and keeps him informed of all important matters. The
Supervisory Board has passed a resolution specifying
the information and reporting duties of the Board of
Management. As a general rule, in the case of reports
required by law, the Board of Management submits
its reports to the Supervisory Board in writing. To the
greatest extent possible, documents required as a basis
for taking decisions are sent to the members of the
Supervisory Board in good time prior to the relevant
meeting. Regarding transactions of fundamental
importance, the Supervisory Board has resolved that
its specific approval is required. Whenever necessary,
the Chairman of the Board of Management obtains
the approval of the Supervisory Board and ensures
that reporting duties to the Supervisory Board are
complied with. The Chairman is supported by all
members of the Board of Management in the ful-
filment of these tasks. The fundamental principle
followed when reporting to the Supervisory Board
is that the information should be provided regularly,
comprehensively and without delay regarding all
significant matters relating to planning, business
performance, risk exposures, risk management and
compliance, as well as any major variances between
actual business development and plans and targets,
and the relevant reasons.
208
Composition and
Work Procedures of
the Supervisory
Board of BMW AG
and its Committees
COMPOSITION AND WORK
PROCEDURES OF THE
SUPERVISORY BOARD OF
BMW AG AND ITS
COMMITTEES
BMW AG’s Supervisory Board is composed of ten share-
holder representatives (elected by the Annual General
Meeting) and ten employee representatives (elected in
accordance with the Co-Determination Act). The ten
Supervisory Board members representing employees
comprise seven Company employees, including one
executive staff representative, and three members elect-
ed following nomination by unions. The Supervisory
Board has the task of advising and supervising the Board
of Management in its management of the BMW Group.
It is involved in all decisions of fundamental importance
for the BMW Group. The Supervisory Board appoints
the members of the Board of Management and decides
upon the level of compensation they receive. The Super-
visory Board can revoke appointments for important
reasons.
The Supervisory Board holds a minimum of two meet-
ings per calendar half-year. Normally, five plenary
meetings are held per calendar year. One meeting each
year is planned to extend to several days and is used,
among other things, to enable an in-depth exchange on
strategic and technological matters. The main topics of
meetings in the period under report are summarised
in the Report of the Supervisory Board. Shareholder
representatives and employee representatives generally
prepare Supervisory Board meetings separately and
occasionally with members of the Board of Manage-
ment. Members of the Supervisory Board are specif-
ically legally bound to maintain secrecy with respect
to confidential reports they receive and confidential
discussions in which they partake.
The Chairman of the Supervisory Board coordinates
work within the Supervisory Board, convenes and
chairs its meetings, handles the external affairs of the
Supervisory Board and represents it before the Board
of Management.
The Supervisory Board is quorate if all members have
been invited to the meeting and at least half the mem-
bers of whom it is required to comprise participate
in the vote. A resolution relating to an agenda item
not included in the invitation is only valid if none
of the members of the Supervisory Board who were
present at the meeting object to the resolution and if
a minimum of two-thirds of the members are present.
Resolutions of the Supervisory Board are generally
passed by a simple majority. The German Co-determi-
nation Act contains specific legal requirements with
regard to majorities and technical procedures, particu-
larly with regard to the appointment and removal of
members of the Board of Management and the election
of Chairman or Deputy Chairman of the Supervisory
Board. In the event of a tied vote in the Supervisory
Board, the Chairman of the Supervisory Board has two
votes in a renewed vote if it also results in a tie.
In practice, resolutions are regularly passed by the
Supervisory Board and its committees at meetings.
Supervisory Board members who are not present can
submit their vote via another Supervisory Board member
in written, fax or electronic form. This rule also applies
for the second vote of the Chairman of the Supervisory
Board. The Chairman of the Supervisory Board can also
grant a period of time in which all members not present
at a meeting may retrospectively vote. In special cases,
resolutions may also be passed outside of meetings, in
particular in writing, by fax or by electronic means.
Resolutions and meetings are recorded in minutes,
which are signed by the relevant Chairman.
Following its meetings, the Supervisory Board is generally
shown information on new vehicle models in the form
of a short presentation.
Following the election of a new Supervisory Board
member, the Corporate Governance Officer informs
the new member of the main framework for performing
duties, in particular the BMW Group Corporate Gov-
ernance Code and individual contributions required in
circumstances which trigger reporting obligations or are
subject to Supervisory Board approval.
All members of the Supervisory Board of BMW AG take
care to ensure that they have sufficient time to perform
their mandate. If members of the Supervisory Board of
BMW AG are also members of the management board of
a listed company, they may not accept more than three
mandates on non-BMW Group supervisory boards of
listed companies or in other bodies with comparable
requirements.
Statement on Corporate Governance 209
According to the rules of procedure, the Chairman of the
Supervisory Board is, by virtue of this function, member
and Chairman of the Presiding Board, the Personnel
Committee and the Nomination Committee.
see Report of
the Supervisory
Board for the
number of
meetings during
the year 2018
The number of meetings held by the Presiding Board
and committees depends on requirements. The Pre-
siding Board, the Personnel Committee and the Audit
Committee generally hold several meetings in the course
of the year.
In line with the rules of procedure for the activities of
the plenum, the Supervisory Board has set out proce-
dural rules for the Presiding Board and committees.
Committees are quorate only when all members par-
ticipate. Committee resolutions are passed by a simple
majority, unless otherwise stipulated by law.
Members of the Supervisory Board may not delegate
their duties to others. However, the Supervisory Board,
the Presiding Board and the committees may call on
experts and informed persons to attend meetings and
advise on specific matters.
The Supervisory Board, the Presiding Board and com-
mittees also meet without the Board of Management
when necessary.
BMW AG ensures that the Supervisory Board and its
committees are appropriately equipped to carry out
their duties. This includes providing a central Supervi-
sory Board office to support the chairpersons in their
coordination work.
In accordance with rules of procedure, the Presiding
Board comprises the Chairman of the Supervisory Board
and Deputies. The Presiding Board prepares Superviso-
ry Board meetings to the extent that the subject matter
does not fall within the remit of a committee. This
includes, for example, preparing the annual Declaration
of Compliance with the German Corporate Governance
Code and assessment of Supervisory Board efficiency.
see “Overview
of Supervisory
Board commit-
tees and their
composition”
The Supervisory Board regularly assesses the efficiency
of its activities. To this end, shared discussion is con-
ducted within the Supervisory Board and individual
meetings held with the Chairman, prepared on the basis
of a questionnaire sent in advance, which is drawn up
by the Supervisory Board.
Members of the Supervisory Board of BMW AG are
obliged to act in the best interest of the organisation as
a whole. They may not pursue personal interests in their
decisions or take advantage of business opportunities
intended to benefit the BMW Group.
Members of the Supervisory Board are obliged to inform
the Supervisory Board of any conflicts of interest, in
particular those resulting from a consulting or executive
role with clients, suppliers, lenders or other business
partners, so that the Supervisory Board can report to
the shareholders at the Annual General Meeting on
its treatment of the issue. Material and non-temporary
conflicts of interest of a Supervisory Board member
result in a termination of mandate.
In proposing candidates for election as members of the
Supervisory Board, care is taken that the Supervisory
Board collectively has the required knowledge, skills and
expertise to perform its tasks appropriately.
The Supervisory Board has stated specific targets
for its composition, agreed to a diversity concept and
determined a competency profile.
see section
“Composition
targets for the
Supervisory
Board”
Members of the Supervisory Board are responsible for
undertaking any training required for the performance
of their duties. The Company provides them with appro-
priate assistance therein.
Taking into account the specific circumstances of
the BMW Group and the number of Board members,
the Supervisory Board has set up a Presiding Board
and four committees: the Personnel Committee, the
Audit Committee, the Nomination Committee and the
Mediation Committee. These serve to raise the efficiency
of the Supervisory Board’s work and facilitate handling
of complex issues. Establishment and function of a
mediation committee is prescribed by law. Committee
chairpersons report in detail on committee work at each
plenary meeting of the Supervisory Board.
Composition of the Presiding Board and the committees
is based on legal requirements, the Articles of Incor-
poration, rules of procedure and corporate governance
principles, while taking into particular account the
expertise of Board members.
In line with the recommendations of the German Cor-
porate Governance Code, the Chairman of the Audit
Committee is independent, and not a former Chairman
of the Board of Management, and has special knowledge
and experience in the application of financial reporting
standards and internal control procedures. He also
fulfils the requirement of being a financial expert as
defined by § 100 (5) and § 107 (4) AktG.
The Nomination Committee is charged with the task of
finding suitable candidates for election to the Super-
visory Board as shareholder representatives and to
propose them to the Supervisory Board for election at
the Annual General Meeting. In line with the recom-
mendations of the German Corporate Governance Code,
the Nomination Committee is exclusively composed of
shareholder representatives.
The establishment and composition of a mediation com-
mittee are prescribed by the German Co-determination
Act. The Mediation Committee has the task of making
proposals to the Supervisory Board if a resolution for the
appointment of a member of the Board of Management
has not been carried by the necessary two-thirds major-
ity of members’ votes. In accordance with statutory
requirements, the Mediation Committee comprises the
Chairman and the Deputy Chairman of the Supervisory
Board, one member selected by shareholder represent-
atives and one by employee representatives.
210
Composition and
Work Procedures of
the Supervisory
Board of BMW AG
and its Committees
The Personnel Committee prepares decisions of the
Supervisory Board with regard to the appointment and,
where applicable, removal of members of the Board of
Management and, together with the full Supervisory
Board and the Board of Management, ensures long-
term succession planning. The Personnel Committee
also prepares decisions of the Supervisory Board with
regard to Board of Management compensation and the
regular review of the compensation system for the Board
of Management. In conjunction with resolutions taken
by the Supervisory Board regarding the compensation
of the Board of Management, the Personnel Committee
is responsible for drawing up, amending and revoking
employment contracts or, when necessary, to prepare
and conclude other relevant contracts with members
of the Board of Management. In certain cases, the
Personnel Committee is also authorised to grant the
necessary approval of a business transaction on behalf of
the Supervisory Board. This includes cases of providing
loans to members of the Board of Management or Super-
visory Board, certain contractual arrangements with
members of the Supervisory Board, taking into account
related parties, as well as ancillary activities of members
of the Board of Management, in particular acceptance
of non-BMW Group supervisory board mandates.
The Audit Committee deals in particular with the super-
vision of the financial reporting process, effectiveness
of the internal control system, the risk management
system, as well as the performance of Supervisory Board
duties in connection with audits pursuant to § 32 of the
German Securities Trading Act (WpHG). It also oversees
the audit of financial statements, auditor independence
and any additional work performed by the auditor. It
prepares the proposal for the election of the auditor at
the Annual General Meeting, makes a relevant recom-
mendation, issues the audit engagement and agrees on
additional areas of audit focus as well as the auditor’s fee.
The Audit Committee prepares the Supervisory Board’s
resolution relating to the Company and Group Financial
Statements and discusses interim reports with the Board
of Management prior to publication. Additionally, the
Audit Committee deals with the non-financial report-
ing, prepares the audit of the Supervisory Board and
the engagement of an external auditor and issues the
audit engagement. Furthermore, the Audit Committee
deals with the supervision of the internal audit system
and compliance as well as the audit and supervision
of any needs for action related to possible violations
of duties by members of the Board of Management in
preparation of a resolution in the Supervisory Board.
The Audit Committee also decides on the Supervisory
Board’s agreement on the use of Authorised Capital
2014 (Article 4 no. 5 of the Articles of Incorporation)
and on amendments to the Articles of Incorporation
which only affect its wording.
Statement on Corporate Governance overview of Supervisory Board committees
and their composition
Principal duties, basis for activities
Members
211
preSIdInG boArd
— preparation of Supervisory Board meetings to the extent that the subject matter to be
— activities based on terms of procedure
discussed does not fall within the remit of a committee
perSonnel CoMMIttee
— preparation of decisions relating to the appointment and revocation of appointment of
members of the Board of Management, the compen sation and the regular review of the
Board of Management’s compensation system
— conclusion, amendment and revocation of employment contracts (in conjunction with
the resolutions taken by the Supervisory Board regarding the compensation of the Board
of Management) and other contracts with members of the Board of Management
— decisions relating to the approval of ancillary activities of Board of Manage ment
members, including acceptance of non-BMW Group supervisory mandates as well as the
approval of transactions requiring Supervisory Board approval by dint of law (e. g. loans
to Board of Management or Supervisory Board members)
— set up in accordance with the recommendation contained in the German Corporate
Governance Code, activities based on terms of procedure
AudIt CoMMIttee
— supervision of the financial reporting process, the effectiveness of the internal control
system, the risk management system, as well as the performance of Supervisory
Board duties in connection with audits pursuant to § 32 of the German Securities Trading
Act (WpHG)
performed by external auditor
— supervision of external audit, in particular auditor independence and additional work
— preparation of proposals for election of external auditor at Annual General Meeting,
engagement (recommendation) of external auditor and compliance of audit
engagement, determination of additional areas of audit emphasis and fee agreements
with external auditor
Group Financial Statements
— preparation of Supervisory Board’s resolution on Company and
— discussion of interim reports with Board of Management prior to publication
— preparation of the Supervisory Board’s audit of the non-financial reporting, preparation of
the selection of the auditor for non-financial reporting and engagement of the auditor
— supervision of internal audit system and compliance as well as the audit and supervision of
any needs for action related to possible violations of duties by members of the Board of
Management in preparation of a resolution in the Supervisory Board
— decision on approval for utilisation of Authorised Capital 2014
— amendments to Articles of Incorporation only affecting wording
— establishment in accordance with the recommendation contained in the
German Corporate Governance Code, activities based on terms of procedure
noMInAtIon CoMMIttee
— identification of suitable candidates (male / female) as shareholder representatives on the
Supervisory Board to be put forward for inclusion in the Super visory Board’s proposals for
election at the Annual General Meeting
— establishment in accordance with the recommendation contained in the German Corpo-
rate Governance Code, activities based on terms of procedure
Norbert Reithofer 1
Manfred Schoch
Stefan Quandt
Stefan Schmid
Karl-Ludwig Kley
Norbert Reithofer 1
Manfred Schoch
Stefan Quandt
Stefan Schmid
Karl-Ludwig Kley
Karl-Ludwig Kley 1, 2
Norbert Reithofer
Manfred Schoch
Stefan Quandt
Stefan Schmid
Norbert Reithofer 1
Susanne Klatten
Karl-Ludwig Kley
Stefan Quandt
(In line with the recommendations of the German Corporate Governance
Code, the Nomination Committee comprises only shareholder
representatives.)
MedIAtIon CoMMIttee
— proposal to Supervisory Board if resolution for appointment of Board of Management
member has not been carried by the necessary two-thirds majority of Supervisory Board
members’ votes
— committee required by law
Norbert Reithofer
Manfred Schoch
Stefan Quandt
Stefan Schmid
1 Chair.
2 (Independent) financial expert within the meaning of §§ 100 (5) and 107 (4) AktG, no. 5.3.2 GCGC.
(In accordance with statutory require ments, the Mediation Committee
comprises the Chairman and Deputy Chairman of the Supervisory Board
and one member each selected by shareholder representatives and
employee representatives.)
212
Composition and
Work Procedures of
the Supervisory
Board of BMW AG
and its Committees
Board of Management succession planning,
diversity concept
The Supervisory Board, in collaboration with the
Personnel Committee and the Board of Management,
ensures long-term succession planning. In their
as sess ment of candidates for Board of Management
positions, the underlying suitability criteria applied
by the Supervisory Board are expertise in the relevant
function, outstanding leadership qualities, proven
track record and knowledge of the Company. The
Supervisory Board has adopted a diversity concept
for the composition of the Board of Management
which is also aligned with recommendations of the
German Corporate Governance Code. In considering
which individuals would best complement the Board
of Management, the Supervisory Board also takes
diversity into account. The criteria diversity is taken
by the Supervisory Board to encompass in particular
different, mutually complementary profiles, profes-
sional and life experiences also at the international
level and an appropriate gender representation. In
reaching its decisions, the Supervisory Board also
considers the following:
— The members of the Board of Management should
have a long-standing track record of manage-
ment experience, ideally with experience in
different professional fields.
— At least two members should have international
management experience.
— At least two members of the Board of Manage-
ment should have a technical background.
— The Board of Management should collectively
have extensive experience in the fields of deve l-
opment, production, sales and marketing, fi-
nances and human resources.
— The Supervisory Board has stipulated a target
for the proportion of women on the Board of
Mana gement. This is outlined in the section
“Disclosures pursuant to the Act on Equal
Gender Participation”. The Board of Management
reports to the Personnel Committee and the
Supervisory Board at regular intervals on the
proportion and development of women in
se nior management positions, in particular at
executive levels.
— In accordance with the recommendation of the
German Corporate Governance Code, the
Supervisory Board has set a standard age limit
for Board of Management membership. This
aims at a retirement age of 60. Consideration is
also given to achieving an appropriate age mix
within the Board of Management.
When selecting an individual for a particular Board of
Management position, the Supervisory Board decides
in the best interests of the Group and after due con-
sideration of all relevant circumstances. The Personnel
Committee takes into account the diversity concept
described above when selecting candidates, in order
to ensure that the Board of Management has a diverse
composition. In the Supervisory Board’s opinion,
the composition of the Board of Management as at
31 December 2018 is in line with the defined diversity
concept. In particular, the Board of Management has
one female member and the various work, educational
and life experiences of the members of the Board of
Management complement each other. For ease of
comparison with the diversity concept, the curricula
vitae of members of the Board of Management are
available on the Internet.
Composition objectives of the Supervisory Board,
competency profile, diversity concept
The Supervisory Board is to be composed in such a way
that its members collectively possess the knowledge,
skills and experience required to properly perform
its tasks.
To this end, the Supervisory Board of BMW AG has
approved the following objectives for its composition,
including a competency profile. These objectives also
describe the concept for achieving diversity in the com-
position of the Supervisory Board (diversity concept):
— Four members of the Supervisory Board should
if possible have international experience or
specialist knowledge of one or more non-German
markets important to the BMW Group.
Statement on Corporate Governance 213
— No persons carrying out directorship functions
or advisory tasks for important competitors of
the BMW Group may belong to the Supervisory
Board. In compliance with applicable law, mem-
bers of the Supervisory Board are to take care
that no persons will be nominated for election
for whom a significant, non-temporary conflict
of interests could arise due to other activities
and functions carried out by them outside the
BMW Group, in particular advisory activities
or directorships with customers, suppliers, credi-
tors or other business partners.
— An age limit for membership of the Supervisory
Board of 70 years is generally to be applied. In
exceptional cases, members may remain on the
Board until the end of the next Annual General
Meeting after reaching the age of 73, in order to
fulfil legal requirements or to facilitate smooth
succession in the case of key roles or specialist
qualifications.
— As a general rule, members of the Supervisory
Board should not hold office for longer than
until the end of the Annual General Meeting at
which the resolution is passed ratifying the
member’s activities for the 14th financial year
after the beginning of the member’s first period
of office. This excludes the financial year in which
the first period of office began. This rule does
not apply to natural persons who either directly
or indirectly hold significant investments in the
Company. In the Company’s interest, deviation
from the general maximum period is possible,
for instance in order to work towards another
composition target, in particular diversity of
gender and technical, professional and personal
backgrounds.
— The Supervisory Board should include if possible
seven members who have acquired in-depth
knowledge and experience within the
BMW Group, though no more than two former
members of the Board of Management.
— Three of the shareholder representatives in the
Supervisory Board should if possible be entrepre-
neurs or persons who have previous experience in
the management or supervision of another
medium or large-sized company.
— Three members of the Supervisory Board should
if possible be persons from the fields of business,
science or research who have experience in areas
relevant to the BMW Group, for example chem-
istry, energy supply, information technology, or
who have specialist knowledge in fields relevant
for the future of the BMW Group, for example
customer requirements, mobility, resources or
sustain ability.
— When seeking qualified individuals for the Super-
visory Board whose specialist skills and leader-
ship qualities are most likely to strengthen the
Board as a whole, consideration is also to be
given to diversity. When preparing nominations,
the extent to which the work of the Supervisory
Board benefits from diversified professional and
personal backgrounds (including international
aspects) and from an appropriate gender repre-
sentation is also to be taken into account. It is
the joint responsibility of all those participating
in the nomination and election process to ensure
that qualified women are considered for Super-
visory Board mem ber ship.
— Of the 20 members of the Supervisory Board at
least 12 should be independent members within
the meaning of section 5.4.2 of the German
Corporate Governance Code, including at least
six as representatives of the Company’s share-
holders.
— Two independent members of the Supervisory
Board should have expert knowledge of accoun t-
ing or auditing.
knowledge in subjects relevant for the future of the
BMW Group, such as customer requirements, mobility,
resources, sustainability and information technology.
For the purpose of assessing the independence of its
members, the Supervisory Board follows the recom-
mendations of the German Corporate Governance
Code. In the opinion of the Supervisory Board, nei-
ther ownership of a substantial shareholding in the
Company, or office as an employee representative, or
previous membership of the Board of Management,
rules out independence of a Supervisory Board mem-
ber. A substantial and not merely temporary conflict
of interests within the meaning of section 5.4.2 of
the German Corporate Governance Code does not
apply to any of the Supervisory Board members.
Employees holding office in the Supervisory Board
are protected by applicable law when performing their
duties. All other Supervisory Board members have a
sufficient degree of economic independence from the
Company. Business with entities in which the mem-
bers of the Supervisory Board carry out a significant
function is conducted on an arm’s length basis. The
Supervisory Board has therefore concluded that all
of its members are independent. At the end of the
reporting period these are: Dr.-Ing. Norbert Reithofer,
Manfred Schoch, Stefan Quandt, Stefan Schmid,
Dr. Karl-Ludwig Kley, Christiane Benner, Dr. Kurt
Bock, Franz Haniel, Ralf Hattler, Dr.-Ing. Heinrich
Hiesinger, Prof. Dr. Reinhard Hüttl, Susanne Klatten,
Prof. Dr. Renate Köcher, Horst Lischka, Willibald Löw,
Simone Menne, Dr. Dominique Mohabeer, Brigitte
Rödig, Jürgen Wechsler and Werner Zierer. At least
three members meet the requirements of an inde-
pendent financial expert. These are Dr. Kurt Bock,
Dr. Karl-Ludwig Kley and Simone Menne. At the end
of the reporting period, the Supervisory Board had six
female members (30 %), comprising three shareholder
representatives and three employee representatives.
The Supervisory Board has 14 male members (70 %),
comprising seven shareholder representatives and
seven employee representatives. The Company there-
fore complies with the statutory gender quota of at
least 30 % female members applicable in Germany
since 1 January 2016. At present, no member of the
Supervisory Board is older than 70 years.
214
Composition and
Work Procedures of
the Supervisory
Board of BMW AG
and its Committees
Disclosures Pursuant
to the Act on Equal
Gender Participation –
Targets for the
Proportion of Women
on the Board of
Management and at
Executive Manage-
ment Levels I and II
The time schedule set by the Supervisory Board for
achieving the above-mentioned composition targets is
the period up to 31 December 2019. The nomination
committee of the Supervisory Board already takes
into account the composition targets in its selection
of potential candidates as representatives of the share-
holders. This enables diversity in the composition of
the Supervisory Board and ensures that the Super-
visory Board collectively possesses the knowledge,
skills and experience required to properly perform
its duties. Proposals for nomination made by the
Supervisory Board to the Annual General Meeting –
insofar as they apply to shareholder Supervisory Board
members – should take account of these objectives in
such a way that they can be achieved with the support
of the appropriate resolutions of the Annual General
Meeting. The Annual General Meeting is not bound
by proposed nominations for election. The voting
freedom of employees in the vote for the employee
members of the Supervisory Board is also protected.
Under the rules stipulated by the German Co-Determi-
nation Act, the Supervisory Board does not have
the right to nominate employee representatives for
election. The objectives which the Supervisory Board
has set itself with regard to its composition are there-
fore not intended to be instructions to those entitled
to vote or restrictions on their voting freedom.
In the Supervisory Board’s opinion, its composition
as at 31 December 2018 fulfilled the composition
objectives detailed above. For ease of comparison
with composition targets, brief curricula vitae of
the current members of the Supervisory Board are
available on the Company’s website at
www.bmwgroup.com.
Information relating to members’ practised profes-
sions and mandates in other statutory supervisory
boards and equivalent national or foreign company
boards, including the length of periods of service on
the Supervisory Board, is provided in the section
Statement on Corporate Governance. Based on this
information, it is evident that the Supervisory Board of
BMW AG is highly diversified, with significantly more
than the targeted four members having international
experience or specialist knowledge with regard to one
or more of the non-German markets important to the
BMW Group. In-depth knowledge and experience
from within the Company are provided by seven
employee representatives, as well as the Chairman
of the Supervisory Board. Only one previous Board of
Management member holds office in the Supervisory
Board. At least four members of the Supervisory Board
have experience in managing another company. The
Supervisory Board also has three entrepreneurs as
members. Most of the members of the Supervisory
Board – including employee representatives – have
experience in supervising another medium-sized or
large company. Moreover, more than three members of
the Supervisory Board have experience and specialist
Statement on Corporate Governance 215
Management level is defined in terms of functional
level and follows a comprehensive job evaluation
system based on Mercer.
proportion of female executives within
management / function levels I and II
at bMw AG
• 80
8.0
7.8
in %
10
5
0
Function level I
Function level II
Diversity contributes to greater competitiveness and
innovation at the BMW Group. Working together in
mixed, complementary teams raises performance
levels and increases customer focus. Promoting an
appropriate gender ratio is seen as an essential com-
ponent of the BMW Group’s diversity concept. Further
increasing the proportion of women therefore remains
an objective of the Board of Management.
The proportion of women in the workforce as a whole
increased again during the financial year under report,
as a result of long-term measures, dialogue and infor-
mation events. Further information on the topic of
diversity within the BMW Group can be found in the
section “Workforce”.
DISCLOSURES PURSUANT
TO THE ACT ON EQUAL
GENDER PARTICIPATION –
TARGETS FOR THE PROPOR-
TION OF WOMEN ON THE
BOARD OF MANAGEMENT
AND AT EXECUTIVE MAN-
AGEMENT LEVELS I AND II
The Act on Equal Participation of Women and Men
in Executive Positions in the Private and the Public
Sector (“Act on Equal Gender Participation”) was
passed into German law in 2015.
In accordance with this legislation, the Supervisory
Board of BMW AG is required to set a target for the
proportion of women on its Board of Management
and a time frame for meeting this target. Likewise,
the Board of Management of BMW AG is required to
establish targets for the two executive management
levels below the Board of Management. As its target
for the Board of Management for the time frame from
1 January 2017 to 31 December 2020, the Supervisory
Board has stipulated that the Board of Management
should continue to have at least one female member.
Assuming that the Board of Management continues
to comprise eight members, this would correspond to
a proportion of at least 12.5 %. At 31 December 2018,
the Board of Management had one female member
(12.5 %). The Supervisory Board considers it desirable
to increase the proportion of women on the Board of
Management and fully supports the Board of Man-
agement’s endeavours to increase the proportion of
women at the highest executive management levels
within the BMW Group.
For the time frame from 1 January 2017 to 31 Decem-
ber 2020, the Board of Management has set a target
range of 10.2 % to 12.0 % for the first level of execu-
tive management and 8 % to 10 % for the second. At
31 December 2018, the proportion of women within
the first executive management level stood at 8.0 %
and at 7.8 % within the second.
216
Information on Cor-
porate Governance
Practices Applied
Beyond Mandatory
Requirements
INFORMATION ON
COR PORATE GOVERNANCE
PRACTICES APPLIED
BEYOND MANDATORY
REQUIREMENTS
Core values and principles of Action
Within the BMW Group, the Board of Management,
the Supervisory Board and the employees base their
actions on five core values which are the cornerstone
of the success of the BMW Group:
Responsibility
We take consistent decisions and commit to them
personally. This allows us to work freely and more
effectively.
Appreciation
We reflect on our actions, respect each other, offer
clear feedback and celebrate success.
Transparency
We acknowledge concerns and identify inconsisten-
cies in a constructive way. We act with integrity.
trust
We trust and rely on each other. This is essential if we
are to act swiftly and achieve our goals.
openness
We are excited by change and open to new opportu-
nities. We learn from our mistakes.
www.oecd.org and
Social responsibility towards employees and
along the supplier chain
The BMW Group stands by its social responsibilities.
Our corporate culture combines the drive for success
with openness, trust and transparency. We are well
aware of our responsibility towards society. Socially
sustainable human resource policies and compliance
with social standards are based on various interna-
tionally recognised guidelines. The BMW Group is
committed to the OECD’s guidelines for multinational
companies and the contents of the ICC Business
Charter for Sustainable Development. Details of the
contents of these guidelines and other relevant infor-
mation can be found at
www.iccwbo.org
and
www.ohchr.org. The Board of Management signed
the United Nations Global Compact in 2001 and, in
2005, together with employee representatives, issued
a Joint Declaration on Human Rights and Working
Conditions in the BMW Group. This Joint Declaration
was reconfirmed in 2010. With the signature of these
documents, we have given our commitment to abide
worldwide by internationally recognised human rights
and the fundamental working standards of the Inter-
national Labour Organization (ILO). These include
in particular freedom of employment, the principle
of non-discrimination, freedom of association and
the right to collective bargaining, the prohibition of
child labour, appropriate remuneration, regulated
working times and compliance with work and safety
regulations. In 2018 we published the BMW Codex
on Human Rights and Working Conditions, which
supplements the Declaration on Human Rights and
Working Conditions from 2010. The Codex is based
on a diligence process, which allows the BMW Group
to identify relevant aspects and define measures. It
reinforces attention to the consideration of human
rights and clarifies how the BMW Group promotes
human rights and implements the ILO Core Labour
Conventions globally in its business activity.
The complete text of the UN Global Compact and
the recommendations of the ILO and other relevant
information can be found at
www.unglobalcompact.org and
www.ilo.org. The Joint Declaration on Human Rights
and Working Conditions in the BMW Group can
be found at
www.bmwgroup.com under the menu items
“Downloads” and “Responsibility”.
Statement on Corporate Governance 217
For the BMW Group, worldwide compliance of these
fundamental principles and rights is self-evident.
Since 2005 employees’ awareness of this issue has
therefore been raised by means of regular internal
communications and training on recent developments
in this area. The “Compliance Contact” helpline
and the BMW Group SpeakUP Line are available to
employees wishing to raise queries or complaints
relating to human rights issues. With effect from 2016,
human rights have been incorporated as an integral
component of the BMW Group’s worldwide Compli-
ance Management System, representing a further step
in the systematic implementation of the UN Guiding
Principles on Business and Human Rights.
Further information on social responsibility towards
employees can be found in the section “Workforce”.
Sustainable business management can only be
effective, however, if it covers the entire value-added
chain. That is why the BMW Group not only sets high
standards for itself, but also expects its suppliers and
partners to meet the ecological and social standards it
sets and strives continually to improve the efficiency
of processes, measures and activities. For instance,
we consistently require our dealers and importers
to comply with ecological and social standards on a
contractual basis. Moreover, corresponding criteria
are embedded throughout the entire purchasing
system – including in enquiries to suppliers, in the
sector-wide OEM Sustainability Questionnaire, in our
purchasing terms and in our evaluation of suppli-
ers – in order to promote sustainability aspects in
line with the BMW Group Sustainability Standard.
The BMW Group expects suppliers to ensure that
the BMW Group’s sustainability criteria are also
adhered to by their sub-suppliers. A spot check of
supplier facilities is conducted with sustainability
audits and assessments. In 2017, the Human Rights
Contact Supply Chain was established for reporting of
sustainability infringements in the supply chain. Pur-
chasing terms and conditions and other information
relating to purchasing can be found in the publicly
available section of the BMW Group Partner Portal
at
https: / / b2b.bmw.com.
We also work in close partnership with our suppliers
and promote their commitment to sustainability.
218
Compliance in the
BMW Group
COMPLIANCE IN THE
BMW GROUP
Responsible and lawful conduct is fundamental to the
success of the BMW Group. It is an integral part of
our corporate culture and the reason why customers,
shareholders, business partners and the general public
place their trust in us. The Board of Management and
the employees of the BMW Group are obliged to act
responsibly and in compliance with applicable laws and
regulations. The BMW Group also expects its business
partners to conduct themselves in the same manner.
In order to protect itself systematically against legal
and reputational risks, the Board of Management
created a Compliance Committee several years ago,
mandated to establish a Compliance Management
System throughout the BMW Group.
The BMW Group Compliance Management System
consists of a coordinated set of instruments and topics
designed to ensure that the BMW Group, its repre-
sentative bodies, its managers and staff act in a lawful
manner. Particular emphasis is placed on measures to
ensure compliance with antitrust legislation and avoid
the risk of corruption or money laundering.
The BMW Group Compliance Committee comprises
the heads of the following departments: Legal Affairs,
Corporate and Governmental Affairs, Corporate
Audit, Group Reporting, Organisational Development
and Corporate Human Resources. It manages and
monitors activities necessary to avoid non-compliance
with the law, including, for example, legal monitoring,
internal compliance regulations, communications and
training activities, complaint and case management,
compliance reporting, compliance controls and follow-
ing through with sanctions in cases of non-compliance.
The BMW Group Compliance Committee reports
regularly to the Board of Management on all compli-
ance-related issues, including the progress made in
refining the BMW Group Compliance Management
System, details of investigations performed, known
infringements of the law, sanctions imposed and cor-
rective / preventative measures implemented. This also
ensures that the Board of Management is immediately
notified of any cases of particular significance.
BMW Group compliance Management System
• 81
Supervisory Board BMW AG
board of Management bMw AG
bMw Group Compliance Committee
bMw Group Compliance Committee
office
company-wide compliance
network
Annual
Report
Annual
Report
Annual
Compliance
Reporting Run
Compliance Instruments
of the bMw Group
Compliance Controls
Compliance Reporting
Compliance Case
Management
Compliance Processes
and IT Systems
Compliance Strategy
Legal Compliance
Monitoring and Trends
Compliance
Risks and
Preventive Efforts
Internal Rules
and Regulations
Compliance Academy and Culture
Compliance Communication
The Board of Management keeps track of and analyses
compliance-related developments and trends on
the basis of the Group’s compliance reporting and
input from the BMW Group Compliance Committee.
Measures to improve the Compliance Management
System are initiated on the basis of identified
requirements.
The Chairman of the BMW Group Compliance
Committee keeps the Audit Committee (which is
part of the Supervisory Board) informed on the
current status of compliance activities within the
BMW Group as well as relevant proceedings both on
a regular and a case-by-case basis as the need arises.
Statement on Corporate Governance The decisions taken by the BMW Group Compliance
Committee are drafted in concept and implemented
operationally by the BMW Group Compliance Com-
mittee Office. The BMW Group Compliance Commit-
tee Office comprises 19 employees and is allocated in
organisational terms to the Chairman of the Board of
Management.
The BMW Group Compliance Committee Office is
supported by local compliance functions, especially
in connection with operational implementation of
compliance topics. Installation of 77 local compliance
functions was completed in 2018. Their activities
follow a standardised management process with
clearly defined tasks and responsibilities. The heads
of these functions serve as the Compliance Officer
for the respective organisational unit.
The various elements of the BMW Group Compli-
ance Management System are shown in the dia-
gram on the previous page and are applicable to all
BMW Group organisational units worldwide. The
BMW Group Legal Compliance Code forms the core
of the Group’s Compliance Management System,
spelling out the Board of Management’s commitment
to compliance as a joint responsibility (“tone from
the top”). The Code also explains the significance
of legal compliance and provides an overview of
the various areas of relevance for the BMW Group.
It is available both as a printed brochure in German
and English and for download. In addition, trans-
lations into 11 other languages are available in the
BMW Group intranet.
The BMW Group Legal Compliance Code is supple-
mented by a whole range of internal policies,
guidelines and instructions, which in part reflect
applicable legislation. The BMW Group Policy “Cor-
ruption Prevention” and the BMW Group Instruc-
tion “Corporate Hospitality and Gifts” deserve
particular mention: these documents deal with
lawful hand ling of gifts and benefits and define
appropriate assessment criteria and approval pro-
cedures. The BMW Group Policy “Antitrust Com-
pliance” establishes binding rules of conduct for
all employees across the BMW Group to prevent
unlawful restriction of competition.
219
Compliance measures are determined and priori-
tised on the basis of a group-wide compliance risk
assessment that is updated annually. In 2018, this was
further refined to create a Compliance Risk and Per-
formance Management Concept, which supports the
recognition of compliance risks and the identi fication
of appropriate preventative IT measures. Through the
function Compliance Coordination in the Financial
Services segment the specific Compliance risks of
the segment are taken into consideration. Measures
are realised with the aid of a regionally structured
compliance management team covering all parts
of the BMW Group, which oversees a network of
around 240 compliance responsibles with 77 local
compliance functions.
Training plays an important role in reinforcing com-
pliance in the corporate culture. In 2018, training
management for online training in Compliance
Essentials and Antitrust Compliance, both available
in German and English, was switched to a central
training platform. These training modules must be
repeated by the required target groups every two
years and include a final test. Successful completion
of the test is confirmed by a certificate.
More than 44,000 managers and staff worldwide have
so far received training in the basic principles of
compliance and are in possession of a valid training
certificate. Successful completion of the training pro-
gramme is mandatory for all BMW Group managers.
Appropriate processes are in place to ensure that
all newly recruited managers and promoted staff
undergo compliance training and repeat it every two
years. In this way, the BMW Group ensures nearly
full training coverage for its managers in compliance
matters.
Online training in antitrust compliance was restruc-
tured in 2018. This training is also mandatory for
managers and staff whose functions or assignments
expose them to antitrust risks. A total of 22,000 man-
agers and associates worldwide have so far completed
antitrust compliance training and currently hold a
valid certificate.
Additional classroom training was also offered for key
compliance topics. The main emphasis here was on
providing training in antitrust law for employees who
participate in meetings with competitors or work with
suppliers or sales partners.
Managers were the main focus of additional training
on the topic of compliance culture, including how to
be a good role model, management style and dealing
with contradictions and crises.
In addition to these communication measures, appro-
priate IT systems also support BMW Group employees
with the assessment, approval and documentation of
compliance-relevant matters.
For example, since 2017, all exchange activities with
competitors must be documented and approved
in a special compliance IT system. All employees
have access to IT tools to help them verify the legal
admissibility of and document benefits, especially in
connection with corporate hospitality.
The BMW Group also uses an IT-based Business Rela-
tions Compliance programme aimed at ensuring the
reliability of its business relations. Relevant business
partners are checked and evaluated with a view to
identifying potential compliance risks. These proce-
dures are particularly relevant for relations with sales
partners and service providers, such as agencies and
consultants. Depending on the results of the evalua-
tion, appropriate measures – such as communication
measures, training and possible monitoring – are
implemented to manage compliance risks.
The IT system used to verify customer integrity has
been expanded and has so far been introduced in
56 organisational units under enhanced anti-money
laundering measures.
Through the group-wide reporting system, compli-
ance responsibles across all organisational units
of the BMW Group report on compliance-relevant
issues to the Compliance Committee on a regular
basis, and, if necessary, also on an ad hoc basis. This
includes reporting on the compliance status of the
relevant organisational units, on identified legal
risks and incidences of non-compliance, as well as
on sanctions and corrective / preventative measures
implemented.
220
Compliance in the
BMW Group
Additional compliance coaching was also imple-
mented for international sales and financial ser-
vice companies in local markets. These multi-day
classroom seminars strengthen the understanding
of compliance in selected organisational units
and enhance cooperation between the central
BMW Group Compliance Committee Office and
decentralised compliance functions. In 2018, market
coaching was conducted in Australia, Austria, Brazil,
Canada, China, Denmark, France, Germany, Italy,
the Netherlands, New Zealand, Russia, Singapore,
Sweden, Switzerland, Thailand and the US.
Any member of staff with questions or concerns
relating to compliance is expected to discuss these
matters with their managers and with the relevant
departments within the BMW Group: in particular
with Legal Affairs, Corporate Audit and Corporate
Security. The BMW Group Compliance Contact serves
as a further point of contact for both employees and
non-employees for any questions regar ding compli-
ance. Non-employees may also use this reporting
system. This communication may remain anonymous,
if preferred.
Employees also have the opportunity to submit infor-
mation about possible breaches of the law within the
Company – anonymously and confidentially – via
the BMW Group SpeakUP Line. The BMW Group
SpeakUP Line is available in a total of 34 languages
and can be reached via local toll-free numbers in all
countries where BMW Group employees are engaged
in activities.
All compliance-related queries and concerns are
documented and followed up by the BMW Group
Compliance Committee Office using an electronic
Case Management System. If necessary, Corporate
Audit, Corporate Security, the legal departments or
the Works Council may be called upon to assist in
the investigation process.
Various internal channels and means of communi-
cation, including newsletters, employee newspapers
and intranet portals, are used to keep BMW Group
employees fully up-to-date with the instruments
and measures used by the Compliance Management
System. The central communications channel is
the compliance website within the BMW Group’s
intranet, where employees can find compliance-
related information and training materials in both
German and English. The website contains a special
service area where various practical tools are made
available to employees to help them deal with typical
compliance-related situations. A group-wide com-
munications campaign was implemented in 2018
to boost employee awareness of the importance
of creating a culture of transparency and trust.
Statement on Corporate Governance 221
was updated in 2010. This was followed by systematic
introduction and continuous upgrading of measures
to protect human rights. These measures, which were
already firmly established within the organisation,
were integrated into the BMW Group’s group-wide
Compliance Management System in 2016. A group-
wide human rights compliance assessment was
conducted in 2017. In the year under review, the
BMW Group published its Code on Human Rights
and Working Conditions, which clarifies how the
Joint Declaration on Human Rights and Working
Conditions at the BMW Group from 2010 should be
implemented. The Code confirms the BMW Group’s
commitment to human rights and outlines how the
Company promotes human rights and implements
the core labour standards of the ILO.
Compliance is also an important factor in safeguard-
ing the future of the BMW Group workforce. With
this in mind, the Board of Management and the
national and international employee representative
bodies of the BMW Group have agreed on a binding
set of Joint Principles for Lawful Conduct. In doing
so, all parties involved made a commitment to the
principles contained in the BMW Group Legal Com-
pliance Code and to trustful cooperation in all matters
relating to compliance. Employee representatives are
therefore regularly involved in the process of refining
compliance measures within the BMW Group.
To ensure that the BMW Group complies with regu-
lations relating to insider information, the Board
of Management appointed an Ad-hoc Committee
back in 1994, consisting of representatives of various
specialist departments, whose members determine
whether information displays the characteristics
of publishable insider information and handle the
publication and legal notices required by law. All
persons who perform duties on behalf of BMW AG
and have access to insider information are included
in an insider list and informed of the duties arising
from insider rules.
Compliance with and implementation of the com-
pliance rules and processes are audited regularly
by Corporate Audit and subjected to control checks
by Corporate Security and the BMW Group Compli-
ance Committee Office. As part of its regular activi-
ties, Corporate Audit carries out on-site audits. The
BMW Group Compliance Committee also engages
Corporate Audit to perform compliance-specific
checks. In addition, a BMW Group Compliance Spot
Check, a sample test specifically designed to identify
potential corruption risks, was carried out in 2018.
Antitrust Compliance Validation was another new
measure introduced in 2018 to identify and audit
possible antitrust risks at the Company. Compliance
control activities are coordinated by the BMW Group
Panel Compliance Controls. Any necessary follow-up
measures are organised by the BMW Group Compli-
ance Committee Office.
Managers, in particular, bear a high degree of respon-
sibility and must set a good example with regard to
preventing infringements. Managers throughout the
BMW Group acknowledge this principle by signing
a written declaration, in which they also undertake
to inform staff working for them of the content and
significance of the Legal Compliance Code, to convey
the values it embodies and make employees aware
of legal risks. Managers must, at regular intervals
and on their own initiative, verify compliance with
the law and communicate with staff on this issue. It
is important to signal to employees that they take
compliance risks seriously and that relevant infor-
mation is extremely valuable. In their dealings with
staff members, managers remain open to discussion
and listen to differing opinions. Any indication of
non-compliance with the law must be rigorously
investigated.
It is essential for compliance in the BMW Group that
employees are aware of and comply with applicable
legal regulations. The BMW Group does not tole r-
ate violations of the law by its employees. Culpable
violations of the law result in employment-contract
sanctions and may involve personal liability conse-
quences for the employee involved.
The BMW Group is committed to respecting interna-
tionally recognised human rights, as set out in the
ten principles of the UN Global Compact and the
ILO Core Labour Conventions. The Company’s due
diligence process is geared towards the UN Guiding
Principles on Business and Human Rights, focusing
on topics and areas of activity where it can leverage
its influence as a commercial enterprise.
The BMW Group stated its position clearly back in
2005, with the Joint Declaration on Human Rights
and Working Conditions at the BMW Group, which
222
Compliance in the
BMW Group
Compensation
Report
Under the terms of the Employee Share Programme,
in 2017 employees were entitled to acquire packages
of 7, 12 or 17 shares of non-voting preferred stock
with a discount of € 20.00 (2017: € 20.00) per share
compared to the market price (average closing price
in Xetra trading during the period from 5 to 8 Novem-
ber 2018: € 66.26). All employees of BMW AG and
its (directly or indirectly) wholly owned German
subsidiaries (if agreed to by the directors of those
entities) were entitled to participate in the programme.
Employees were required to have been in an uninter-
rupted employment relationship with BMW AG or the
relevant subsidiary for at least one year at the date
on which the allocation for the year was announced.
Shares of preferred stock acquired in conjunction
with the Employee Share Programme are subject to
a blocking period of four years, starting from 1 Janu-
ary of the year in which the employees acquired the
shares. A total of 521,524 (2017: 491,114) shares of
preferred stock were acquired by employees under the
programme in 2018; 521,500 (2017: 491,000) of these
shares were drawn from Authorised Capital 2014, the
remainder were acquired via the stock exchange or as
a result of cancelled employee purchases relating to
the previous year. Every year the Board of Ma na-
ge ment of BMW AG decides whether the scheme is
to be continued. Further information is provided in
notes 31 and 41 to the Group Financial Statements.
see
note 41
see
notes
31 and 41
Share-based compensation programmes for
employees and members of the Board of
Management
Three share-based remuneration schemes were
in place at BMW AG during the year under report,
namely the Employee Share Programme (under which
entitled employees of BMW AG have been able to
participate in the enterprise’s success since 1989 in
the form of non-voting shares of preferred stock), a
share-based remuneration programme for Board of
Management members, and a share-based remuner-
ation programme for senior heads of department
(relating in both cases to shares of common stock).
The share-based remuneration programme for Board
of Management members is described in detail in
the Compensation Report (see also the “Share-based
remuneration” section in the Compensation Report
and
note 41 to the Group Financial Statements).
The share-based remuneration programme for qual-
ifying heads of department, introduced with effect
for financial years beginning after 1 January 2012, is
closely based on the programme for Board of Manage-
ment members and is aimed at rewarding a long-term,
entrepreneurial approach to running the business on
a sustainable basis.
Under the terms of the programme, participants give
a commitment to invest an amount equivalent to 20 %
of their performance-based bonus in BMW common
stock and to hold the shares so acquired for a mini-
mum of four years. In return for this commitment,
BMW AG pays 100 % of the investment amount as a net
subsidy. Once the four-year holding period require-
ment has been fulfilled, the participants receive – for
each three common stock shares held and at the
Company’s option – one further share of common
stock or the equivalent amount in cash.
Statement on Corporate Governance 223
compensation. It also ensures that variable compo-
nents based on multi-year criteria take account of
both positive and negative developments and that
the overall incentive is on the long term. As a general
rule, targets and comparative parameters may not
be changed retrospectively. In connection with the
revised compensation system for the Board of Manage-
ment (see the section Revised Board of Management
compensation system for financial years from 2018
onwards), the targets originally set for the variable
compensation components for the financial years 2018
and 2019 were revoked exceptionally and replaced
by the more ambitious targets stipulated in the new
compensation system applicable from 2018 onwards.
The Supervisory Board reviews the appropriateness
of the compensation system annually. In preparation,
the Personnel Committee also consults remuneration
studies. In order to check that the compensation sys-
tem is in line with peers, the Supervisory Board com-
pares compensation paid by other DAX companies.
For a vertical view, it compares Board compensation
with the salaries of executive managers and with the
average salaries of employees of BMW AG based in
Germany, also with regard to the development over
time. Recommendations made by an independent
external remuneration expert and suggestions made
by investors and analysts are also considered in the
consultative process.
revised board of Management compensation
system for financial years from 2018 onwards
In December 2017, the Supervisory Board resolved
to revise the compensation system for financial years
from 2018 onwards. A focus was to align the remu-
neration structure even more strongly on sustainable
corporate development. The base salary, which had
remained at the same level since 1 January 2012, was
raised. The bonus was revised, both in terms of its
structure and the target setting. Target values for the
parameters Group net profit and post-tax return on
sales used to determine the earnings-related bonus
were adjusted in line with the Group’s current business
plan and revised. A new multi-year and future-ori-
ented component was introduced in the form of a
performance cash plan, in order to further strengthen
the long-term orientation of the compensation system.
The overall upper limits are unchanged. The changes
apply to all members of the Board of Management
for financial years with effect from 1 January 2018.
COMPENSATION REPORT
(PART OF THE COMBINED
MANAGEMENT REPORT)
The following section describes the principles governing
the compensation of the Board of Management for
financial years from 2018 onwards. A description of the
stipulations set out in the statutes relating to the com-
pensation of the Supervisory Board is also provided.
In addition to explaining the system of compensation,
details of components of compensation are also pro-
vided with figures. Furthermore, the compensation of
each individual member of the Board of Management
and the Supervisory Board for the financial year 2018
is disclosed with its component parts.
1. board of Management compensation
responsibilities
The full Supervisory Board is responsible for deter-
mining and regularly reviewing Board of Management
compensation. The preparation for these tasks is
undertaken by the Supervisory Board’s Personnel
Committee.
principles of compensation
The compensation system for the Board of Management
at BMW AG is designed to encourage a management
approach focused on the sustainable development of
the BMW Group. A further principle of the compen-
sation system at the BMW Group is that of consistency.
This means that compensation systems for the Board
of Management, senior management and employees
of BMW AG are composed of similar elements. The
Supervisory Board performs an annual review to
ensure that all Board of Management compensation
components are appropriate, individually and in total,
and do not encourage the Board of Management to take
inappropriate risks for the BMW Group. At the same
time, the compensation model used for the Board of
Management needs to be attractive for highly qualified
executives in a competitive environment.
The compensation of members of the Board of Man-
agement is determined by the full Supervisory Board
on the basis of performance criteria and after taking
into account any remuneration received from Group
companies. The principal performance criteria are
the tasks and exercise of mandate of the member of
the Board of Management, the economic situation as
well as the performance and future prospects of the
BMW Group. The Supervisory Board sets ambitious
and relevant parameters as the basis for variable
fixed remuneration
Fixed remuneration consists of a base salary, which is
paid monthly, and fringe benefits (other remuneration
elements such as the use of Company cars, insurance
premiums and contributions towards security sys-
tems). With effect from the financial year 2018, the
base salary is € 0.8 million p. a. for a Board member
during the first period of office, € 0.95 million p. a. for
a Board member from the second period of office or
the fourth year of mandate and € 1.8 million p. a. for
the Chairman of the Board of Management.
Variable remuneration
The variable remuneration of the Board of Manage-
ment comprises three components:
— bonus
— Performance Cash Plan and
— share-based remuneration
Payment of a discretionary additional bonus is not fore-
seen. An upper limit has been set for each component of
variable remuneration (see Overview of compensation
system and compensation components).
224
Compensation
Report
compensation system, compensation components
Board of Management compensation comprises fixed
and variable cash elements as well as a share-based
component. The compensation components are
described in more detail below. Retirement benefits
remained unchanged in the revised compensation
system applicable from 1 January 2018.
overview of compensation system for financial
year 2018: simplified depiction of allocation to
cash benefits (target compensation) and pension
contribution 1
• 82
in %
Pension contribution
approx. 8
Share-based
remuneration
approx. 14
Performance
Cash Plan
approx. 24
Base salary
approx. 27
Earn-
ings-based
component of
the bonus
approx. 8
Performance component
of the bonus approx. 19
1 Simplified depiction of target amounts for the variable cash remuneration of the Chairman
of the Board of Management. Excludes other remuneration. Based on the assumption that
the share price remains unchanged for the calculation of the matching component.
overview of compensation system: simplified
depiction of variable remuneration (target
compensation) 2
• 83
in %
Share-based remuneration
approx. 22
Performance
Cash Plan
approx. 37
Earnings-based
component
of the bonus
approx. 12
Performance
component
of the bonus
approx. 29
2 Simplified depiction of target amounts for the variable cash remuneration of the Chairman
of the Board of Management. Excludes basic salary, other remuneration and pension
contribution. Based on the assumption that the share price remains unchanged for the
calculation of the matching component.
Statement on Corporate Governance bonus
In the case of 100 % target achievement, the bonus
comprises an earnings-related component of 30 % and
performance-related component of 70 %. The target
bonus (100 %) is € 0.85 million p. a. for a Board member
during the first period of office, € 1.0 million p. a.
from the second period of office or the fourth year
of mandate and € 1.8 million p. a. for the Chairman
of the Board of Management. For all Board members,
the upper limit of the bonus is set at 180 % of the
relevant target bonus.
In order to calculate the earnings-related component,
an earnings factor is determined on the basis of the
target parameters and multiplied by 30 % of the target
bonus amount. The level of the earnings-related com-
ponent depends on the degree to which the targets
set by the Supervisory Board for Group net profit and
post-tax return on sales are achieved. The degree of
achievement is expressed in an earnings factor. The
underlying measurement values are determined in
advance for a period of three financial years and may
not be changed retrospectively. The earnings factor is
capped at a maximum of 1.8.
An earnings factor of 1.0 would give rise to a earnings-
related component of € 0.255 million for a Board member
in the first period of office, € 0.3 million from the
second period of office or the fourth year of mandate
and € 0.54 million for the Chairman of the Board of
Management. The earnings factor is 1.0, for instance,
in the event of a Group net profit of € 5.3 billion and a
post-tax return on sales of 5.6 %. If the Group net profit
Bonus overview
• 84
225
were below € 3 billion or the post-tax return on sales
below 3 %, the earnings factor would be zero. In this
case, an earnings-related component would not be paid.
The maximum value of the earnings factor is reached
in the event of a Group net profit of € 11 billion and a
post-tax return on sales of 9 %. In exceptional circum-
stances, for instance major acquisitions or disposals,
the Supervisory Board may adjust the earnings factor.
The performance-related component is calculated
using a performance factor which the Supervisory
Board sets for each member of the Board of Manage-
ment and which is multiplied by 70 % of the target
bonus amount. The Supervisory Board sets the perfor-
mance factor on the basis of a detailed evaluation of
the contribution made by Board members to sustainable
and long-term business development over a period of
at least three financial years. The evaluation by the
Supervisory Board is based on predefined criteria that
take into account the Group’s long-term success, the
interests of shareholders, the interests of employees
and social responsibility.
The criteria include in particular innovation (economic
and ecological, for example in the reduction of carbon
dioxide emissions), the Group’s market position
compared to its competitors, customer focus, ability
to adapt, leadership, corporate culture, promotion of
compliance and integrity, contribution to the Group’s
attractiveness as an employer, progress in implement-
ing the diversity concept, and activities that foster
corporate social responsibility. The individual perfor-
mance factor lies between zero and a maximum of 1.8.
eArnInGS CoMponent bonuS
Earnings factor
x 0.3 of target amount
+ perforMAnCe CoMponent
Performance factor
x 0.7 of target amount
= totAl
— Cash payment
— Capped at 180 %
of target amount
Basis for earnings factor:
— Group net profit
— Group post-tax return on sales
— Value between 0 and 1.8
Basis for performance factor:
— Contribution to sustainable and long-term
business development over a period of
at least three financial years
— Qualitative, mainly non-financial parameters
— Value between 0 and 1.8
226
Compensation
Report
performance Cash plan
With effect from the financial year 2018, variable cash
compensation includes a multi-year and future-oriented
Performance Cash Plan (PCP). The PCP is calculated at
the end of a three-year evaluation period, by multi-
plying a predefined target amount by a factor that
is based on multi-year target achievement (the PCP
factor). PCP entitlements are paid in cash. The PCP
target amount (100 %) amounts to € 0.85 million p. a.
for a Board member in the first period of office,
€ 0.95 million p. a. from the second period of office
or the fourth year of mandate and € 1.6 million p. a.
for the Chairman of the Board of Management. The
maximum amount that can be paid to a Board member
is capped at 180 % of the PCP target amount p. a.
The PCP evaluation period comprises three years, the
grant year and the two subsequent years. The PCP is
paid out after the end of the three-year evaluation period.
In order to determine the PCP factor, a multi-year
earnings factor is multiplied by a multi-year perfor-
mance factor. The PCP factor is capped at a maximum
of 1.8.
performance cash plan overview
• 85
In order to determine the multi-year earnings factor,
an earnings factor is calculated for each year of the
three-year evaluation period and an average is then
calculated for the evaluation period. As for the earn-
ings-related component of the bonus, the earnings
factor for each individual year within the evaluation
period is determined on the basis of Group net profit
and post-tax return on sales for the relevant year.
The maximum earnings factor is 1.8. The underlying
measurement values are determined in advance for
a period of three financial years and may not be
changed retrospectively.
In addition to the multi-year earnings factor, the
Supervisory Board also determines a multi-year
performance factor after the end of the evaluation
period. To this end, the Supervisory Board takes
account of in particular the business development
during the evaluation period, the forecast trend in the
business development for subsequent years, the Board
member’s individual contribution to profitability and
the status of compliance within the Board member’s
area of responsibility. The multi-year performance
factor can be between 0.9 and 1.1.
tArGet AMount
x pCp fACtor
= CASh pAyMent
— Cash payment at end of evaluation period
— Capped at 180 % of target amount
pcp factor overview
• 86
MultI-yeAr eArnInGS fACtor
— Average earnings factor
— Based on Group net profit and
Group post-tax return on sales
— Value between 0 and 1.8
x MultI-yeAr perforMAnCe fACtor = pCp fACtor
Measurement based on
multi-year performance factor:
— Trend in business development
— Status of compliance in each Board member’s
— Individual contribution to profitability
— Forecast trend in business development
— Value between 0.9 and 1.1
area of responsibility
Statement on Corporate Governance 227
other
In the event of death or invalidity, special rules apply for
early payment of performance cash plans and share-
based remuneration components based on the target
amounts. Insofar the service contract is prematurely
terminated and the Company has an extraordinary
right of termination, or if the Board member resigns
without the Company’s agreement, entitlements to
amounts as yet unpaid relating to performance cash
plans and share-based remuneration are forfeited.
A one-year post-contractual non-competition clause
has been agreed with Board members under specified
circumstances. During that one-year period, the for-
mer Board member is entitled to receive monthly
compensation equivalent to 60 % of his or her pre-
vious monthly basic remuneration, reduced by any
amount of other income exceeding 40 % of the basic
remuneration. The Company may unilaterally waive
the requirement to comply with the post-contractual
non-competition clause.
Members of the Board of Management receive advance
payments out of the Performance Cash Plan 2018 and
the Performance Cash Plan 2019 in the years 2019
and 2020. At the end of evaluation period, the advance
payment will be set off or refunded, depending on the
amount then determined. The advance payment for
each year is € 0.5 million for a Board member in the
first period of office and € 0.6 million from the second
period of office or the fourth year of mandate. For the
Chairman of the Board of Management the amount
is € 0.9 million p. a.
Share-based remuneration
Members of the Board of Management receive a cash
compensation (investment component) for the specific
purpose of investment after tax and contributions in
BMW AG common stock. For financial years from 2018
onwards, the investment component corresponds to
45 % of the gross bonus. Shares of common stock pur-
chased in this way by Board members are required to
be held for a period of four years.
At the end of the holding period, Board members receive
from the Company, as previously, for every three shares
of common stock held, either one additional share of
common stock or the cash equivalent, to be decided
at the Company’s discretion (matching component).
Upper limits have been defined for both the invest-
ment component and the matching component (see
Overview of compensation system and compensation
components).
228
overview of compensation system and compensation
components
Compensation
Report
Component
Parameter / measurement base
BASE SALARY p. A.
VArIAble reMunerAtIon
Bonus
(sum of earnings-related bonus and performance-related bonus)
a) Earnings-related bonus
(at 100 % target achievement corresponds to 30 % of target amount)
Member of the Board of Management:
— € 0.80 million (1st period of office)
— € 0.95 million (from 2nd period of office or 4th year of mandate)
Chairman of the Board of Management:
— € 1.80 million
Target amount p. a. (at 100 % target achievement):
— € 0.85 million (1st period of office)
— € 1.0 million (from 2nd period of office or 4th year of mandate)
— € 1.8 million (Chairman of the Board of Management)
— Capped at 180 % of target amount, see section Remuneration caps
— Formula: 30 % target amount x earnings factor
— Base amount p. a. (30 % target amount per bonus):
— € 0.255 million (1st period of office)
— € 0.30 million (from 2nd period of office or 4th year of mandate)
— € 0.54 million (Chairman of the Board of Management)
— Quantitative criteria fixed in advance for a period of three financial years
— Earnings factor is derived from Group net profit and Group post-tax return on sales
— The earnings factor is 1.0 in the event of a Group net profit of € 5.3 billion and a post-tax
— Earnings factor may not exceed 1.8
— Maximum amount of earnings-related bonus p. a.:
return on sales of 5.6 %
— € 0.459 million (1st period of office)
— € 0.54 million (from 2nd period of office or 4th year of mandate)
— € 0.972 million (Chairman of the Board of Management)
b) Performance-related bonus
(at 100 % target achievement corresponds to 70 % of target amount)
— Formula: 70 % target amount x performance factor
— Base amount p. a. (70 % target amount per bonus):
— € 0.595 million (1st period of office)
— € 0.70 million (from 2nd period of office or 4th year of mandate)
— € 1.26 million (Chairman of the Board of Management)
— Primarily qualitative, non-financial criteria, expressed in terms of a performance factor
aimed at measuring the Board member’s contribution to the sustainable and long-term
development and the future viability of the Company over a period of at least three finan-
cial years
— Criteria for the performance factor include: innovation (economic and ecological, for
example in the reduction of carbon dioxide emissions), the Group’s market position
compared to its competitors, customer focus, ability to adapt, leadership, corporate
culture, promotion of compliance and integrity, contribution to the Group’s attractiveness
as an employer, progress in implementing the diversity concept, and activities that
foster corporate social responsibility
— Performance factor may not exceed 1.8
— Maximum amount of performance-related bonus p. a.:
— € 1.071 million (1st period of office)
— € 1.26 million (from 2nd period of office or 4th year of mandate)
— € 2.268 million (Chairman of the Board of Management)
Statement on Corporate Governance Component
Parameter / measurement base
229
VArIAble reMunerAtIon
Performance Cash Plan
a) Multi-year earnings factor
b) Multi-year performance factor
Share-based remuneration programme
a) Cash remuneration component
(investment component)
b) Share-based remuneration component
(matching component)
other reMunerAtIon
Target amount p. a. (at 100 % target achievement):
— € 0.85 million (1st period of office)
— € 0.95 million (from 2nd period of office or 4th year of mandate)
— € 1.6 million (Chairman of the Board of Management)
— 3-year evaluation period
— Capped at 180 % of target amount, see section Remuneration caps
— Formula: PCP factor x target amount
— PCP factor: multi-year earnings factor x multi-year performance factor
— PCP factor may not exceed 1.8
— Earnings factor for each year of three-year evaluation period derived from Group net profit
— Earnings factor for each year may not exceed 1.8
— Average for evaluation period calculated
— Determined by Supervisory Board at end of evaluation period
— Criteria include in particular the trend in business development during the evaluation
and Group post-tax return on sale
period, the forecast trend in business development, individual contribution to profitability
and the status of compliance within the Board member’s area of responsibility
— Multi-year performance factor can be between 0.9 and 1.1
— Requirement for Board of Management members to invest an amount of 45 % of the
— Requirement for Board of Management members to hold the acquired shares of common
gross bonus after tax and contributions in BMW AG common stock
stock for four years
— Earmarked cash remuneration amounting to 45 % of the gross bonus
— Cash remuneration p. a. at 100 % target achievement of the bonus:
— € 0.3825 million (1st period of office)
— € 0.45 million (from 2nd period of office or 4th year of mandate)
— € 0.81 million (Chairman of the Board of Management)
— Maximum remuneration, see section Remuneration caps
— Once the four-year holding period requirement is fulfilled, Board of Management mem-
bers receive for each three common stock shares held either – at the Company’s option –
one further share of common stock or the equivalent amount in cash
— Maximum remuneration, see section Remuneration caps
Contractual agreement, main points: non-cash benefits from use of Company car, insurance
premiums, contributions towards security systems
230
Compensation
Report
overview of compensation system and compensation
components onwards
retIreMent And SurVIVInG dependAntS’ benefItS
Model
Principal features
Defined contribution system with guaranteed minimum rate of return
Pension based on amounts credited to individual savings accounts for contributions paid
and interest earned, various forms of disbursement
Pension contributions p. a.:
Member of the Board of Management: € 350,000
Chairman of the Board of Management: € 500,000
reMunerAtIon CA pS (MAxIMuM reMunerAtIon)
in € p. a.
Member of the Board of Management
in the first period of office
Member of the Board of Management
in the second period of office or from fourth year of mandate
Chairman of the Board of Management
Share-based compensation programme
Bonus
Performance
Cash Plan
Cash compen-
sation for share
acquisition
Monetary value
of matching
component
Total*
1,530,000
1,530,000
688,500
344,500
4,925,000
1,800,000
3,240,000
1,710,000
2,880,000
810,000
1,458,000
405,000
729,000
5,500,000
9,850,000
* Including base salary, other fixed remuneration elements and pension contribution. The overall cap is lower than the sum of the maximum amounts for each of the individual components.
Retirement benefits
With effect from 1 January 2010, the provision of retire-
ment benefits for members of the Board of Management
was changed to a defined contribution system with
a guaranteed minimum return. Retirement benefits
remain unchanged as part of the new compensation
system applicable for financial years from 2018 onwards,
as they are appropriate and in line with customary
market practice.
If a mandate is terminated, the defined contribution
system provides, in the case of death or invalidity, for
amounts accumulated on individual pension accounts
to be paid out as a one-off amount or in instalments.
Former members of the Board of Management are
entitled to receive the retirement benefit at the earliest
upon reaching the age of 60, or in the case of entitle-
ments awarded after 1 January 2012, upon reaching
the age of 62.
The amount of the benefits to be paid is determined
on the basis of the amount accrued in each Board
member’s individual pension savings account. The
amount on this account results from annual contri-
butions paid in, plus interest earned depending on
the type of investment.
If a member of the Board of Management with a vested
entitlement dies prior to the commencement of benefit
payments, a surviving spouse or registered partner,
or otherwise surviving children – in the latter case
depending on their age and education – are entitled
to receive benefits as surviving dependants.
In the case of death or invalidity, a minimum benefit
is payable based on the number of contributions
possible up to the age of 60 (subject to maximum of
ten contributions).
The annual contribution paid by the Company is
€ 350,000 for a Board member and € 500,000 for the
Chairman of the Board of Management. The guaran-
teed minimum rate of return p. a. corresponds to the
maximum interest rate used to calculate insurance
reserves for life insurance policies (guaranteed interest
on life insurance policies). When granting pension
entitlements, the Supervisory Board considers the
targeted level of pension provision in each case as well
as the resulting expense for the BMW Group.
Contributions falling due under the defined con-
tribution model are paid into an external fund in
conjunction with a trust model that is also used to
fund pension obligations to employees.
Income earned on an employed or a self-employed
basis up to the age of 63 may be offset against instal-
ment payments. In addition, certain circumstances
have been specified, in the event of which the Com-
pany no longer has any obligation to pay benefits.
Transitional payments are not provided.
Statement on Corporate Governance In the event of the death of a member of the Board
of Management during the service contract term,
the base remuneration for the month of death and a
maximum of three further calendar months are paid
to entitled surviving dependants.
Board of Management members who retire imme-
diately after their service on the Board are entitled
to acquire vehicles and other BMW Group products
and services at conditions that also apply to BMW
pensioners and to lease BMW Group vehicles in
accordance with the guidelines applicable to senior
heads of departments. Retired Chairmen of the Board
of Management are entitled to use a BMW Group
vehicle as a company car on a similar basis to senior
heads of departments, and depending on availability
and against payment, use BMW chauffeur services.
Termination benefits on premature termination of
Board activities, benefits paid by third parties
Mr Duesmann left the Board of Management Board
at the end of 24 July 2018 and was released from his
duties for the remaining term of his service contract
(until the end of 30 September 2019), with remunera-
tion continuing to be paid until that date. For the
period from 25 July 2018 to 31 December 2018, he
received a base remuneration of € 0.348 million and
other remuneration of € 0.015 million. The bonus for
this period amounts to € 0.324 million, the proportion-
ate cash remuneration component of the share-based
remuneration programme (investment component)
amounts to € 0.146 million. The proportionate share-
based remuneration component of the share-based
remuneration programme (matching component)
has a provisional monetary value of € 0.025 million;
the provisional number of matching shares is 295
(calculated in each case at the grant date). The final
number of matching shares is determined when the
requirement to invest in BMW AG common stock has
been fulfilled. The Company paid a proportionate pen-
sion contribution of € 0.152 million. The base remu-
neration from 1 January 2019 to 30 September 2019
amounts to € 0.6 million. The pension contribution for
this period amounts to € 0.263 million. The expense
for these and other entitlements relating to the service
231
contract for the financial years 2019 and 2020 amounts
to € 3.0 million.
In accordance with the recommendation of the German
Corporate Governance Code, Board of Management
service contracts provide for severance pay to be paid
to the Board member in the event of premature ter-
mination by the Company without important reason,
the amount of which is limited to a maximum of two
years’ compensation (severance payment cap). If the
remaining term of the contract is less than two years,
the severance payment is reduced proportionately.
For these purposes, annual compensation comprises
the basic remuneration, the target bonus amount and
the target PCP amount for the last full financial year
before termination.
No commitments or agreements exist for payment of
compensation in the event of early termination of a
Board member’s mandate due to a change of control or
a takeover offer. No members of the Board of Manage-
ment received any payments or relevant commitment
from third parties in 2018 on account of their activities
as members of the Board of Management.
remuneration caps
The Supervisory Board has stipulated upper limits
for all variable remuneration components and for the
remuneration of Board of Management members in
total. The upper limits are shown in the table Over-
view of compensation system and compensation
components. The overall upper limits (caps) have not
changed in conjunction with the revised compensa-
tion system for financial years from 2018 onwards.
total compensation of the board of Management for
the financial year 2018 (2017)
The total compensation of the current members of the
Board of Management of BMW AG for the financial
year 2018 amounted to € 24.0 million (2017: € 40.3 mil-
lion), of which € 8.2 million (2017: € 7.7 million) relates
to fixed components including other remuneration.
Variable components amounted to € 15.0 million (2017:
€ 31.7 million) and the share-based remuneration com-
ponent amounted to € 0.8 million (2017: € 0.9 million).
2018
2017
in € million
Amount
Proportion in %
Amount
Proportion in %
Fixed compensation
Variable cash compensation
Share-based compensation component*
Total compensation
8.2
15.0
0.8
24.0
34.2
62.5
3.3
100.0
7.7
31.7
0.9
40.3
19.1
78.7
2.2
100.0
* Matching component; provisional number or provisional monetary value calculated at grant date (date on which the entitlement became binding in law). The final number of matching shares is determined in
each case when the requirement to invest in BMW AG common stock has been fulfilled.
Total
3,382,560
(6,679,776)
1,879,200
(3,896,565)
609,490
(3,339,913)
1,879,200
(3,339,888)
1,597,320
(–)
1,597,320
(3,339,888)
1,879,200
(3,896,565)
399,330
(–)
1,785,240
(3,339,888)
15,008,860
(31,729,048)
Share-based
compensation component
(matching component) 3
Total value of
Compensation
benefits allocated
Total
in financial year 4
Number
Monetary value
1,981
(2,017)
1,181
(1,263)
383
(1,083)
1,100
(1,008)
1,004
(–)
935
(1,008)
1,181
(1,263)
277
(–)
1,045
(1,008)
9,087
(9,913)
171,158
5,376,110
5,293,109
(181,490)
(8,382,730)
(8,295,070)
102,038
3,006,202
2,985,294
(113,645)
(4,985,985)
(4,915,446)
33,091
1,135,233
1,102,142
(97,448)
(4,289,829)
(4,192,381)
95,040
2,988,273
2,893,233
(90,700)
(4,246,471)
(4,155,771)
86,746
2,574,435
2,487,689
(–)
(–)
(–)
80,784
2,516,716
2,435,932
(90,700)
(4,272,838)
(4,182,138)
102,038
2,983,015
2,941,756
(113,645)
(4,951,164)
(4,837,519)
21,645
634,004
612,359
(–)
(–)
(–)
90,288
2,800,522
2,710,234
(90,700)
(4,206,340)
(4,115,640)
782,828
24,014,510
23,461,748
(891,973)
(40,262,725)
(39,608,356)
Harald Krüger
Milagros Caiña Carreiro-Andree
Markus Duesmann 5
Klaus Fröhlich
Pieter Nota
Nicolas Peter
Peter Schwarzenbauer
Andreas Wendt 6
Oliver Zipse
Total 7
–
(–)
–
(–)
–
(–)
–
(–)
–
(–)
–
(–)
–
(–)
–
(–)
–
(–)
–
(–)
232
Compensation
Report
Compensation of the individual members
of the board of Management for the
financial year 2018 (2017) 1
in € or
number of matching shares
Base salary
Other
compensation
Total
Bonus
Share-based
compensation
component (invest-
ment component)
Performance
Cash Plan
2018 – 2020 2
Fixed compensation
Variable cash compensation
Harald Krüger
Milagros Caiña Carreiro-Andree
Markus Duesmann 5
Klaus Fröhlich
Pieter Nota
Nicolas Peter
Peter Schwarzenbauer
Andreas Wendt 6
Oliver Zipse
Total 7
1,800,000
(1,500,000)
950,000
(900,000)
451,613
(750,000)
950,000
(750,000)
800,000
(–)
800,000
(750,000)
950,000
(900,000)
200,000
(–)
900,000
(750,000)
7,801,613
22,392
1,822,392
2,332,800
1,049,760
(21,464)
(1,521,464)
(5,566,500)
(1,113,276)
74,964
1,024,964
1,296,000
(75,775)
41,039
(975,775)
(3,247,125)
492,652
420,338
(102,468)
(852,468)
(2,783,250)
64,033
1,014,033
1,296,000
(65,883)
90,369
(–)
38,612
(92,250)
(815,883)
(2,783,250)
890,369
1,101,600
(–)
(–)
838,612
1,101,600
(842,250)
(2,783,250)
51,777
1,001,777
1,296,000
(40,954)
13,029
(–)
24,994
(25,752)
421,209
(940,954)
(3,247,125)
213,029
275,400
(–)
(–)
924,994
1,231,200
(775,752)
(2,783,250)
583,200
(649,440)
189,152
(556,663)
583,200
(556,638)
495,720
(–)
495,720
(556,638)
583,200
(649,440)
123,930
(–)
554,040
(556,638)
(7,200,000)
(441,704)
(7,641,704)
(26,440,875)
(5,288,173)
8,222,822
10,350,938
4,657,922
1 Remuneration for the financial year 2017 was paid in accordance with the compensation system applicable for that year, at which stage arrangements for base remuneration, variable remuneration and target
amounts were structured differently.
2 New variable remuneration components from the financial year 2018. Payment to be made for the first time after the end of the first three-year evaluation period 2018 to 2020.
3 Provisional number or provisional monetary value calculated at grant date (date on which the entitlement became binding in law). The final number of matching shares is determined in each case when the
requirement to invest in BMW AG common stock has been fulfilled. See note 41 to the Group Financial Statements for a description of the accounting treatment of the share-based remuneration component.
4 Value of benefits granted for work performed on the Board of Management during the financial year 2018 plus the amount falling due for payment in conjunction with a share-based remuneration component
granted in a previous year and for which the holding period requirements were met.
5 Member of the Board of Management until 24 July 2018.
6 Member of the Board of Management since 1 October 2018.
7 Disclosures for the previous year include amounts relating to a member of the Board of Management who left office with effect from the end of the financial year 2017.
For financial years from 2018 onwards, a new variable
compensation component was introduced in the form
of the Performance Cash Plan. The PCP is paid out
after the end of the relevant three-year evaluation
period. In the case of PCP for the financial year 2018,
this covers the financial years 2018 to 2020. Due to
the fact that the criteria for the evaluation period 2018
to 2020 have not yet been fully met, it is not included
in variable compensation for the financial year 2018.
The expense of the PCP for the financial year 2018
recognised in accordance with IAS 19 amounted to
€ 5.3 million.
An expense of € 3.4 million (2017: € 3.1 million) was
recognised in the financial year 2018 for current mem-
bers of the Board of Management for the period after
the end of their service relationship. This relates to
the expense for allocations to pension provisions in
accordance with IAS 19.
Total benefits paid to former members of the Board of
Management and their surviving dependants for the
financial year 2018 amounted to € 9.2 million (2017:
€ 6.7 million). This includes the above-mentioned
payments to Mr Duesmann.
Pension obligations to former members of the Board
of Management and their surviving dependants
are covered by pension provisions amounting to
€ 91.0 million (2017: € 90.1 million), recognised in
accordance with IAS 19.
Statement on Corporate Governance in € or
Other
number of matching shares
Base salary
compensation
Total
Total
Number
Monetary value
Share-based
compensation component
(matching component) 3
Compensation
Total
Total value of
benefits allocated
in financial year 4
1,981
(2,017)
1,181
(1,263)
383
(1,083)
1,100
(1,008)
1,004
(–)
935
(1,008)
1,181
(1,263)
277
(–)
1,045
(1,008)
9,087
(9,913)
171,158
5,376,110
5,293,109
(181,490)
(8,382,730)
(8,295,070)
102,038
3,006,202
2,985,294
(113,645)
(4,985,985)
(4,915,446)
33,091
1,135,233
1,102,142
(97,448)
(4,289,829)
(4,192,381)
95,040
2,988,273
2,893,233
(90,700)
(4,246,471)
(4,155,771)
86,746
2,574,435
2,487,689
(–)
(–)
(–)
80,784
2,516,716
2,435,932
(90,700)
(4,272,838)
(4,182,138)
102,038
2,983,015
2,941,756
(113,645)
(4,951,164)
(4,837,519)
21,645
634,004
612,359
(–)
(–)
(–)
90,288
2,800,522
2,710,234
(90,700)
(4,206,340)
(4,115,640)
782,828
24,014,510
23,461,748
(891,973)
(40,262,725)
(39,608,356)
Harald Krüger
22,392
1,822,392
2,332,800
1,049,760
3,382,560
(21,464)
(1,521,464)
(5,566,500)
(1,113,276)
(–)
(6,679,776)
Milagros Caiña Carreiro-Andree
74,964
1,024,964
1,296,000
Fixed compensation
Variable cash compensation
Share-based
compensation
component (invest-
Bonus
ment component)
Performance
Cash Plan
2018 – 2020 2
1,800,000
(1,500,000)
950,000
(900,000)
451,613
(750,000)
950,000
(750,000)
800,000
(–)
800,000
(750,000)
950,000
(900,000)
200,000
(–)
900,000
(750,000)
7,801,613
(75,775)
41,039
(975,775)
(3,247,125)
492,652
420,338
(102,468)
(852,468)
(2,783,250)
64,033
1,014,033
1,296,000
(65,883)
90,369
(–)
38,612
(92,250)
(40,954)
13,029
(–)
24,994
(25,752)
421,209
(815,883)
(2,783,250)
890,369
1,101,600
(–)
(–)
838,612
1,101,600
(842,250)
(2,783,250)
(940,954)
(3,247,125)
213,029
275,400
(–)
(–)
924,994
1,231,200
(775,752)
(2,783,250)
583,200
(649,440)
189,152
(556,663)
583,200
(556,638)
495,720
(–)
495,720
(556,638)
583,200
(649,440)
123,930
(–)
554,040
(556,638)
–
–
–
–
–
–
–
–
–
–
1,879,200
(–)
(3,896,565)
609,490
(–)
(3,339,913)
1,879,200
(–)
(3,339,888)
1,597,320
(–)
(–)
1,597,320
(–)
(3,339,888)
1,879,200
(–)
(3,896,565)
(–)
399,330
(–)
1,785,240
(–)
(3,339,888)
Markus Duesmann 5
Klaus Fröhlich
Pieter Nota
Nicolas Peter
Andreas Wendt 6
Oliver Zipse
Total 7
(7,200,000)
(441,704)
(7,641,704)
(26,440,875)
(5,288,173)
(–)
(31,729,048)
8,222,822
10,350,938
4,657,922
15,008,860
1 Remuneration for the financial year 2017 was paid in accordance with the compensation system applicable for that year, at which stage arrangements for base remuneration, variable remuneration and target
amounts were structured differently.
2 New variable remuneration components from the financial year 2018. Payment to be made for the first time after the end of the first three-year evaluation period 2018 to 2020.
3 Provisional number or provisional monetary value calculated at grant date (date on which the entitlement became binding in law). The final number of matching shares is determined in each case when the
requirement to invest in BMW AG common stock has been fulfilled. See note 41 to the Group Financial Statements for a description of the accounting treatment of the share-based remuneration component.
4 Value of benefits granted for work performed on the Board of Management during the financial year 2018 plus the amount falling due for payment in conjunction with a share-based remuneration component
granted in a previous year and for which the holding period requirements were met.
5 Member of the Board of Management until 24 July 2018.
6 Member of the Board of Management since 1 October 2018.
7 Disclosures for the previous year include amounts relating to a member of the Board of Management who left office with effect from the end of the financial year 2017.
Peter Schwarzenbauer
51,777
1,001,777
1,296,000
233
Harald Krüger
Milagros Caiña Carreiro-Andree
Markus Duesmann 5
Klaus Fröhlich
Pieter Nota
Nicolas Peter
Peter Schwarzenbauer
Andreas Wendt 6
Oliver Zipse
Total 7
234
Compensation
Report
Share-based component of the individual members
of the board of Management for the
financial year 2018 (2017) 1
in €
Harald Krüger
Milagros Caiña Carreiro-Andree
Markus Duesmann 3
Klaus Fröhlich
Pieter Nota
Nicolas Peter
Peter Schwarzenbauer
Andreas Wendt 5
Oliver Zipse
Total 6
Expense in 2018
in accordance with
HGB and IFRS
Provision at
31.12. 2018 in
accordance with
HGB and IFRS2
30,821
(54,038)
46,218
(63,120)
78,614
(41,001)
– 19,097 4
458,341
(515,677)
268,257
(303,169)
121,745
(43,131)
254,591
(162,436)
(273,688)
23,661
(–)
51,812
(29,175)
32,264
23,661
(–)
80,987
(29,175)
354,125
(186,278)
(382,640)
1,632
(–)
29,002
(122,484)
1,632
(–)
222,771
(193,769)
274,927
1,786,110
(800,435)
(2,215,688)
1 The share-based remuneration component (matching component) for the financial year 2017 was calculated in accordance with the compensation system applicable for that year.
2 Provisional number or provisional monetary value calculated on the basis of the closing price of BMW common stock in the Xetra trading system on 28 December 2018 (€ 70.70) (fair value at reporting date).
3 Member of the Board of Management until 24 July 2018.
4 Amount based on the revaluation of share price at balance sheet date.
5 Member of the Board of Management since 1 October 2018.
6 Disclosures for the previous year include amounts relating to a member of the Board of Management who left office with effect from the end of the financial year 2017.
Statement on Corporate Governance pension entitlements
in €
Harald Krüger
Milagros Caiña Carreiro-Andree
Klaus Fröhlich
Pieter Nota
Nicolas Peter
Peter Schwarzenbauer
Andreas Wendt 2
Oliver Zipse
Total 3
Markus Duesmann 4
235
Service cost in
accordance with
IFRS for the
financial year 20181
Service cost in
accordance with
HGB for the
financial year 20181
Defined Benefit
Obligation IFRS
Defined Benefit
Obligation HGB
504,831
(505,281)
509,486
5,753,913
5,753,776
(510,702)
(5,558,607)
(5,558,200)
354,224
357,468
2,561,031
2,560,943
(355,527)
353,119
(353,136)
350,000
(–)
353,119
(350,000)
(359,275)
(2,347,166)
(2,346,906)
356,382
2,660,630
2,660,630
(356,949)
(2,373,842)
(2,373,842)
350,000
350,276
350,041
(–)
(–)
(–)
356,382
2,004,567
2,004,567
(350,000)
(1,757,459)
(1,757,454)
353,119
356,382
2,188,161
2,188,159
(354,117)
132,500
(–)
353,289
(353,536)
(357,918)
(1,893,252)
(1,893,216)
132,500
1,886,766
1,886,766
(–)
(–)
(–)
356,550
2,298,444
2,298,405
(357,339)
(2,071,748)
(2,071,560)
2,754,201
2,775,150
19,703,788
19,703,287
(3,136,302)
(3,059,645)
(21,987,289)
(21,072,823)
617,548
(355,840)
620,741
1,521,226
1,521,192
(359,521)
(1,020,053)
(1,018,857)
1 Service cost differs due to the different valuation bases used to measure pension obligations for HGB purposes (expected settlement amount) and for IFRS purposes
(present value of the performance-based pension obligation).
2 Member of the Board of Management since 1 October 2018.
3 Disclosures for the previous year include amounts relating to a member of the Board of Management who left office with effect from the end of the financial year 2017.
4 Member of the Board of Management until 24 July 2018.
236
Compensation
Report
2. Supervisory Board compensation
Responsibilities, provisions of Articles of
Incorporation
The compensation of the Supervisory Board is specified
either by a resolution of the shareholders at the Annual
General Meeting or in the Articles of Incorporation.
The compensation provisions valid for the financial
year under report were resolved by shareholders at
the Annual General Meeting on 14 May 2013 and are
set out in Article 15 of BMW AG’s Articles of Incor-
www.bmwgroup.com within
poration, which are available at
the section “Company” (menu items “Company
Portrait” and “Corporate Governance”) as well as in
“BMW Group Download Centre”.
compensation principles,
compensation components
The Supervisory Board of BMW AG receives a fixed
compensation component as well as an earnings- related
compensation component, which is oriented toward
sustainable growth. The earnings-related component
is based on average earnings per share of common
stock for the remuneration year and the two preceding
financial years.
The fixed and earnings-related components in combi-
nation are intended to ensure that the compensation of
Supervisory Board members is appropriate in relation
to the tasks of Supervisory Board members and the
Company’s financial condition and also takes account
of the Company’s performance over several years.
In accordance with the Articles of Incorporation, each
member of BMW AG’s Supervisory Board receives, in
addition to the reimbursement of reasonable expenses,
a fixed amount of € 70,000, payable at the end of the
year, as well as earnings-related compensation of € 170
for each full € 0.01 by which the average amount of
(undiluted) earnings per share (EPS) of common stock
reported in the Group Financial Statements for the
remuneration year and the two preceding financial
years exceed a minimum amount of € 2.00, pay-
able after the Annual General Meeting held in the
following year. An upper limit corresponding to
twice the amount of the fixed compensation is in
place for the earnings-related compensation. The
limit for a member of the Supervisory Board with
no additional compensation-relevant function is
therefore set at € 140,000.
With fixed compensation elements and an earnings-
related compensation component oriented toward
sustainable growth, the compensation structure in
place for BMW AG’s Supervisory Board complies with
the recommendation on supervisory board compensa-
tion contained in section 5.4.6 paragraph 2 sentence 2
of the German Corporate Governance Code, in the
version dated 7 February 2017.
The German Corporate Governance Code also recom-
mends in section 5.4.6 paragraph 1 sentence 2 that
the exercising of chair and deputy chair positions in
the Supervisory Board as well the chair and member-
ship of committees should also be considered in the
compensation.
Accordingly, the Articles of Incorporation of BMW AG
stipulate that the Chairman of the Supervisory Board
shall receive three times the amount and each Deputy
Chairman shall receive twice the amount of the remu-
neration of a Supervisory Board member. Each chairman
of the Supervisory Board’s committees receives twice
the amount and each member of a committee receives
one-and-a-half times the amount of the remuneration of
a Supervisory Board member, provided the relevant
committee convened for meetings on at least three
days during the financial year. If a member of the
Supervisory Board exercises more than one of the
functions referred to above, the compensation is
measured only on the basis of the function that is
remunerated with the highest amount.
In addition, each member of the Supervisory Board
receives an attendance fee of € 2,000 for each full
meeting of the Supervisory Board (Plenum) which
the member has attended, payable at the end of the
financial year. Attendance at more than one meeting
on the same day is not remunerated separately.
The Company also reimburses to each member of the
Supervisory Board reasonable expenses and any value-
added tax arising on the member’s remuneration. The
amounts disclosed below are net amounts.
In order to perform his duties, the Chairman of the
Supervisory Board has the use of an office, with
administrative support, as well as access to the BMW
car service.
Statement on Corporate Governance Total compensation of the Supervisory Board for the
financial year 2018
In accordance with Article 15 of the Articles of Incor-
poration, the compensation of the Supervisory Board
for activities during the financial year 2018 totalled
€ 5.6 million (2017: € 5.6 million ). This includes fixed
compensation of € 2.0 million (2017: € 2.0 million)
and variable compensation of € 3.6 million (2017:
€ 3.6 million). The earnings-related compensation for
the financial year 2018 was capped at the maximum
amount stipulated in the Articles of Incorporation.
237
in € million
Fixed compensation
Variable compensation
Total compensation
Supervisory Board members did not receive any further
compensation or benefits from the BMW Group for
advisory or agency services personally rendered.
2018
2017
Amount
Proportion in %
Amount
Proportion in %
2.0
3.6
5.6
35.7
64.3
100.0
2.0
3.6
5.6
35.7
64.3
100.0
238
Compensation
Report
Responsibility
Statement by the
Company’s Legal
Representatives
compensation of the individual members of the Supervisory Board for the financial year 2018 (2017)
Fixed
compensation
Attendance fee
Variable
compensation
in €
Norbert Reithofer (Chairman)
Manfred Schoch (Deputy Chairman) 1
Stefan Quandt (Deputy Chairman)
Stefan Schmid (Deputy Chairman) 1
Karl-Ludwig Kley (Deputy Chairman)
Christiane Benner 1
Kurt Bock 2
Franz Haniel
Ralf Hattler
Heinrich Hiesinger
Reinhard Hüttl
Susanne Klatten
Renate Köcher
Robert W. Lane 3
Horst Lischka 1
Willibald Löw 1
Simone Menne
Dominique Mohabeer 1
Brigitte Rödig 1
Jürgen Wechsler 1
Werner Zierer 1
Total 5
210,000
(210,000)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
70,000
(70,000)
43,656
(–)
70,000
(70,000)
70,000
(70,000)
70,000
(44,785)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
26,532
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
1,820,188
10,000
(10,000)
10,000
(10,000)
10,000
(10,000)
8,000
(10,000)
10,000
(10,000)
8,000
(6,000)
8,000
(–)
8,000
(10,000)
10,000
(10,000)
10,000
(6,000)
10,000
(10,000)
8,000
(10,000)
10,000
(10,000)
2,000
(8,000)
10,000
(10,000)
10,000
(10,000)
8,000
(8,000)
10,000
(10,000)
10,000
(10,000)
8,000
(8,000)
10,000
(10,000)
188,000
Total
640,000
(640,000)
430,000
(430,000)
430,000
(430,000)
428,000
(430,000)
430,000
(430,000)
218,000
(216,000)
138,968
(–)
218,000
(220,000)
220,000
(220,000)
220,000
(140,355)
200,000
(189,780)
218,000
(220,000)
220,000
(220,000)
81,597
(218,000)
220,000
(220,000)
220,000
(220,000)
218,000
(218,000)
220,000
(220,000)
220,000
(220,000)
218,000
(218,000)
220,000
(220,000)
420,000
(420,000)
280,000
(280,000)
280,000
(280,000)
280,000
(280,000)
280,000
(280,000)
140,000
(140,000)
87,312
(–)
140,000
(140,000)
140,000
(140,000)
140,000
(89,570)
120,000 4
(109,780)
140,000
(140,000)
140,000
(140,000)
53,065
(140,000)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
3,620,377
5,628,565
1 These employee representatives have – in line with the guidelines of the Deutscher Gewerkschaftsbund – requested that their remuneration be paid into the Hans Böckler-Stiftung.
2 Member of the Supervisory Board since 17 May 2018.
3 Member of the Supervisory Board until 17 May 2018.
4 Due to the requirements of his employer, Prof. Dr. Hüttl has waived his Supervisory Board compensation until further notice, to the extent that such compensation exceeds the amount of € 200,000
(excluding value added tax) p. a.
5 Disclosures for the previous year include amounts relating to a member of the Supervisory Board who left office during the financial year 2017.
(1,820,188)
(188,000)
(3,610,156)
(5,618,344)
3. other
Apart from vehicle lease and financing contracts
entered into on customary market conditions, no
advances or loans were granted to members of the
Board of Management and the Supervisory Board by
BMW AG or its subsidiaries, nor were any contingent
liabilities entered into on their behalf.
Statement on Corporate Governance 239
RESPONSIBILITY
STATEMENT BY THE
COMPANY’S LEGAL
REPRESENTATIVES
Statement pursuant to § 117 No. 1 of the
Securities Trading Act (WpHG) in conjunction
with § 297 (2) sentence 4 and § 315 (1) sentence
5 of the German Commercial Code (HGB)
“To the best of our knowledge, and in accordance with
the applicable reporting principles, the Consolidated
Financial Statements give a true and fair view of the
assets, liabilities, financial position and profit of the
Group, and the Group Management Report includes
a fair review of the development and performance of
the business and the position of the Group, together
with a description of the principal opportunities and
risks associated with the expected development of
the Group.”
Munich, 19 February 2019
Bayerische Motoren Werke
Aktiengesellschaft
The Board of Management
Harald Krüger
Milagros Caiña Carreiro-Andree Klaus Fröhlich
Pieter Nota
Dr. Nicolas Peter
Peter Schwarzenbauer
Dr.-Ing. Andreas Wendt
Oliver Zipse
240
Independent
Auditor’s Report
INDEPENDENT
AUDITOR’S REPORT
To Bayerische Motoren Werke
Aktiengesellschaft, Munich
Report on the Audit of the Consoli-
dated Financial Statements and of
the Group Management Report
Opinions
We have audited the consolidated financial statements
of Bayerische Motoren Werke Aktiengesell schaft,
Munich, and its subsidiaries (the Group or BMW Group),
which comprise the consolidated balance sheet as
at 31 December 2018, and the consolidated income
statement, consolidated statement of comprehensive
income, consolidated statement of changes in equity
and consolidated statement of cash flows for the finan-
cial year from 1 January to 31 December 2018, and
notes to the consolidated financial statements, includ-
ing a summary of significant accounting policies. In
addition, we have audited the combined management
report of Bayerische Motoren Werke Aktiengesellschaft
(hereinafter referred to as the “group management
report”) for the financial year from 1 January to
31 December 2018. In accordance with German legal
requirements we have not audited the content of the
corporate governance statement which is included
in the section “Corporate Governance Statement
(Section 289 f HGB)” of the group management report.
In our opinion, on the basis of the knowledge obtained
in the audit,
— the accompanying consolidated financial state-
ments comply, in all material respects, with the
IFRSs as adopted by the EU, and the additional
requirements of German commercial law pursu-
ant to Section 315 e (1) HGB [Handelsgesetz-
buch: German Commercial Code] and, in com-
pliance with these requirements, give a true
and fair view of the assets, liabilities, and finan-
cial position of the Group as at 31 December
2018, and of its financial performance for the
financial year from 1 January to 31 Decem-
ber 2018, and
— the accompanying group management report as
a whole provides an appropriate view of the
Group’s position. In all material respects, this
group management report is consistent with
the consolidated financial statements, complies
with German legal requirements and appro-
priately presents the opportunities and risks of
future development. Our opinion on the group
management report does not cover the content
of the corporate governance statement men-
tioned above.
Pursuant to Section 322 (3) sentence 1 HGB, we declare
that our audit has not led to any reservations relating
to the legal compliance of the consolidated financial
statements and of the group management report.
Basis for the Opinions
We conducted our audit of the consolidated financial
statements and of the group management report in
accordance with Section 317 HGB and EU Audit
Regulation No 537 / 2014 (referred to subsequently
as “EU Audit Regulation”) and in compliance with
German Generally Accepted Standards for Financial
Statement Audits promulgated by the Institut der
Wirtschaftsprüfer (IDW) [Institute of Public Audi-
tors in Germany]. Our responsibilities under those
requirements and principles are further described
in the “Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements and of the
Group Management Report” section of our auditor’s
report. We are independent of the group entities in
accordance with the requirements of European law
and German commercial and professional law, and we
have fulfilled our other German professional respon-
sibilities in accordance with these requirements. In
addition, in accordance with Article 10 (2) (f) of
the EU Audit Regulation, we declare that we have
not provided non-audit services prohibited under
Article 5 (1) of the EU Audit Regulation. We believe
that the evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions on the
consolidated financial statements and on the group
management report.
Key Audit Matters in the Audit of the Consolidated
Financial Statements
Key audit matters are those matters that, in our pro-
fessional judgement, were of most significance in our
audit of the consolidated financial statements for the
financial year from 1 January to 31 December 2018.
These matters were addressed in the context of our
audit of the consolidated financial statements as a
whole, and in forming our opinion thereon, we do not
provide a separate opinion on these matters.
Statement on Corporate Governance 241
research institutes. We ensured the computational
accuracy of the forecast values by verifying key cal-
culation steps.
Our observations
The methods and processes for determining the
expected residual values of the leased products under-
lying the valuation are appropriate. The assumptions
and parameters incorporated in the forecast model for
the residual value are appropriate as a whole.
Valuation of receivables from sales financing
Please refer to note 4 “accounting policies as well
as assumptions, judgements and estimates” in the
notes to the consolidated financial statements, for
“Receivables from sales financing” please refer to
note 25.
The financial statement risk
BMW Group offers end customers, dealerships and
importers various financing models for vehicles
and other assets. In this regard, current and non-
current receivables from sales financing totalling
EUR 86,783 million were recognised as at the reporting
date. Impairment losses amounting to EUR 1,032 mil-
lion were recognised on these receivables as at the
reporting date.
Impairment losses have been determined on the basis
of expected credit losses since financial year 2018.
This method takes into account probabilities of default
and loss given default, estimates of the amount receiv-
able in the event of default, setting criteria for the
transfer between stages for determining a significant
change in the default risk of borrowers, assumptions
on future cash flows and macroeconomic scenarios,
the determination of which is subject to considerable
judgement and estimation uncertainties in each case.
There is a risk for the financial statements that the
creditworthiness of dealerships, importers and end
customers is assessed incorrectly, the risk provisioning
parameters are derived incorrectly and an impairment
loss required on receivables from sales financing is not
recognised or not recognised in a sufficient amount.
Valuation of residual values of leased products
Please refer to note 4 “accounting policies as well as
assumptions, judgements and estimates” in the notes
to the consolidated financial statements, for “Leased
products” please refer to note 23.
The financial statement risk
BMW Group leases vehicles to end customers as part
of operating leases. As at the reporting date, the value
of leased products amounted to EUR 38,572 million.
The key estimated value for the purposes of subse-
quent measurement is the expected residual value
at the end of the lease term.
The estimation of future residual values is subject to
judgement and is complex due to the large number
of assumptions to be made and the amount of data
incorporated in the determination. For the residual
value forecasts, BMW Group uses internally avail-
able data on historical values, current market data
as well as forecasts from external market research
institutes.
There is a risk for the financial statements that the
residual values expected for the end of the lease terms
are not appropriately assessed and the impairment
losses or reversal of impairment losses required for
the leased products are not recognised in sufficient
amounts.
Our audit approach
By means of inquiries, inspecting internal calcula-
tion methods and analysing the disposal proceeds
of vehicles, among other methods, we obtained an
understanding of the development of leased products,
the underlying residual value risks and business pro-
cesses for the identification, management, monitoring
and measurement of residual value risks.
We reviewed the appropriateness and effectiveness of
the internal control system, particularly in relation to
the determination of expected residual values. This
included the audit of the compliance of the relevant IT
systems as well as the interfaces implemented therein
by our IT specialists.
In addition, we evaluated the appropriateness of the
forecasting methods, the model assumptions as well
as the parameters used for the determination of the
residual values based on the validations carried out
by BMW Group. For this purpose, we inquired with
BMW Group’s experts responsible for the management
and monitoring of residual value risks and inspected
the internal analysis on residual value developments
and residual value forecasts as well as the validation
results. Furthermore, we evaluated the processes
for processing external forecast values from market
242
Independent
Auditor’s Report
Our audit approach
By means of inquiries, inspecting internal calculation
methods and analysis, among other methods, we
obtained a comprehensive understanding of the
development of credit portfolios, the associated
counterparty-related risks and the business processes
for the identification, management, monitoring and
measurement of counterparty credit risks.
We also assessed the methodology for determining the
expected loss on a yearly basis or for the remaining
term to maturity, default rates and the credit expo-
sure in the event of default and for determining and
presenting the ‘transfer between stages’ of receivables
based on significant changes in the credit risk of a
borrower.
We also audited the appropriateness and effectiveness
of the internal control system in relation to the risk
classification procedures as well as the derivation of
the significant rise in credit risk from changes in risk
classification. In addition, we evaluated the relevant
IT systems and internal processes. The audit included
a review by our IT specialists of the appropriateness
of the systems concerned and associated interfaces to
ensure the completeness of data as well as the audit
of automated controls for data processing.
A key component of our audit was to assess the
appropriateness of the risk classification procedures,
transfer between stages and the risk provisioning
parameters used, which are derived based on histori-
cal default probabilities and loss given default by
taking account of the anticipated effects of future
trends in relevant macroeconomic criteria. We also
analysed the validations of parameters that are reg-
ularly conducted. To assess the default risk, we also
used purposive sampling of individual cases to verify
that the attributes for assignment to the respective
risk categories were suitably available and the impair-
ment losses had been calculated using the parameters
defined for these risk categories. In addition we
assessed loans for correct risk classification based
on random samples.
Our observations
The risk provisioning methodology, internal processes
and the assumptions and risk parameters used for the
determination of receivables from sales financing are
suitable for the early identification of credit risks and
determining impairment losses in accordance with the
applicable financial reporting standards.
Valuation of provisions for statutory and non-statutory
warranty obligations and product guarantees
Please refer to note 4 “accounting policies as well as
assumptions, judgements and estimates” in the notes
to the consolidated financial statements, for “Other
provisions” please refer to note 33.
The financial statement risk
Provisions for statutory and non-statutory warranty
obligations and product guarantees are included in
the consolidated financial statements of BMW Group
as a significant component in ‘Other provisions’. The
provisions for statutory and non-statutory warranty
obligations and product guarantees amounted to
EUR 5,158 million as at 31 December 2018.
BMW Group is responsible for the legally prescribed
product liability and the warranty in the respective
sales market. Moreover, additional warranties are
granted to differing extents. In order to assess the
liabilities arising from warranty, guarantee and
goodwill for vehicles sold, information on the type
and volume of damages arising and on remedial
measures is recorded and evaluated at vehicle model
level. The expected amount of obligations arising
from warranty claims is extrapolated from costs of
the past and provided for. For specific or anticipated
individual circumstances, for example recalls, addi-
tional provisions are set aside provided they have not
already been taken into account. The determination of
provisions is associated with unavoidable estimation
uncertainties, is complex and is subject to a high
degree of risk of change, depending on factors such
as detected deficiencies becoming known and claims
made by vehicle owners.
There is a risk for the financial statements that the
valuation of provisions for statutory and non-statutory
warranty obligations and product guarantees is not
appropriate.
Our audit approach
In order to evaluate the appropriateness of the
valuation method used for the determination of the
provisions for statutory and non-statutory warranty
obligations and product guarantees including the
assumptions and parameters, through discussions
with the departments responsible, we primarily
obtained an understanding of the process for deter-
mining the assumptions and parameters. We audited
the appropriateness and effectiveness of controls to
determine the assumptions and parameters. With
the involvement of our IT specialists, we reviewed
the IT systems utilised to verify their appropriateness.
Statement on Corporate Governance We compared the amount of provisions from the prior
year with expenses selected according to risk and
which actually arose for damage claims, as well as with
technical measures, in order to arrive at a conclusion
on the forecast accuracy.
Based on a deliberate sample of vehicle models,
the computational accuracy of the valuation model
used across the Group including a tool for rate-
based planning was verified with the support of our
actuaries. The measurement parameters included
therein, such as cost components, were reconciled
with actual costs. We evaluated the assumptions
concerning the extent to which the historical values
are representative for the expected damage sus-
ceptibility, for the expected value of damage per
vehicle in terms of material and labour cost and for
the anticipated claim.
Our observations
The method for the valuation of provisions for
statutory and non-statutory warranty obligations
and product guarantees is appropriate and has been
applied consistently. The measurement parameters
and assumptions applied are appropriate as a whole.
243
Other Information
Management is responsible for the other information.
The other information comprises:
— the corporate governance statement and
— the remaining parts of the annual report, with
the exception of the audited consolidated finan-
cial statements and group management report
and our auditor’s report.
Our opinions on the consolidated financial statements
and on the group management report do not cover
the other information, and consequently we do not
express an opinion or any other form of assurance
conclusion thereon.
In connection with our audit, our responsibility is
to read the other information and, in so doing, to
consider whether the other information
— is materially inconsistent with the consolidated
financial statements, with the group manage-
ment report or our knowledge obtained in the
audit, or
— otherwise appears to be materially misstated.
244
Independent
Auditor’s Report
Responsibilities of Management and the
Supervisory Board for the Consolidated Financial
Statements and the Group Management Report
Management is responsible for the preparation of
consolidated financial statements that comply, in
all material respects, with IFRSs as adopted by the
EU and the additional requirements of German
commercial law pursuant to Section 315 e (1) HGB
and that the consolidated financial statements, in
compliance with these requirements, give a true and
fair view of the assets, liabilities, financial position,
and financial performance of the Group. In addition,
management is responsible for such internal control
as they have determined necessary to enable the
preparation of consolidated financial statements
that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements,
management is responsible for assessing the Group’s
ability to continue as a going concern. They also
have the responsibility for disclosing, as applicable,
matters related to going concern. In addition, they
are responsible for financial reporting based on the
going concern basis of accounting unless there is an
intention to liquidate the Group or to cease operations,
or there is no realistic alternative but to do so.
Furthermore, management is responsible for the
preparation of the group management report that,
as a whole, provides an appropriate view of the
Group’s position and is, in all material respects, con-
sistent with the consolidated financial statements,
complies with German legal requirements, and
appropriately presents the opportunities and risks
of future development. In addition, management is
responsible for such arrangements and measures
(systems) as they have considered necessary to ena-
ble the preparation of a group management report
that is in accordance with the applicable German
legal requirements, and to be able to provide suffi-
cient appropriate evidence for the assertions in the
group management report.
The Supervisory Board is responsible for overseeing
the Group’s financial reporting process for the prepa-
ration of the consolidated financial statements and of
the group management report.
Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements and of the
Group Management Report
Our objectives are to obtain reasonable assurance
about whether the consolidated financial statements
as a whole are free from material misstatement,
whether due to fraud or error, and whether the
group management report as a whole provides an
appropriate view of the Group’s position and, in all
material respects, is consistent with the consolidated
financial statements and the knowledge obtained in
the audit, complies with the German legal require-
ments and appropriately presents the opportunities
and risks of future development, as well as to issue
an auditor’s report that includes our opinions on the
consolidated financial statements and on the group
management report.
Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in
accordance with Section 317 HGB and the EU Audit
Regulation and in compliance with German Generally
Accepted Standards for Financial Statement Audits
promulgated by the Institut der Wirtschaftsprüfer
(IDW) will always detect a material misstatement.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these consolidated financial statements and this group
management report.
We exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
— identify and assess the risks of material misstate-
ment of the consolidated financial statements
and of the group management report, whether
due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropri-
ate to provide a basis for our opinions. The risk
of not detecting a material misstatement result-
ing from fraud is higher than for one resulting
from error, as fraud may involve collusion, for-
gery, intentional omissions, misrepresentations,
or the override of internal controls.
Statement on Corporate Governance — obtain an understanding of internal control
relevant to the audit of the consolidated finan-
cial statements and of arrangements and meas-
ures (systems) relevant to the audit of the group
management report in order to design audit
procedures that are appropriate in the circum-
stances, but not for the purpose of expressing
an opinion on the effectiveness of these systems.
— evaluate the appropriateness of accounting poli-
cies used by management and the reason-
ableness of estimates made by management and
related disclosures.
— conclude on the appropriateness of manage-
ment’s use of the going concern basis of account-
ing and, based on the audit evidence obtained,
whether a material uncertainty exists related to
events or conditions that may cast significant
doubt on the Group’s ability to continue as a go-
ing concern. If we conclude that a material un-
certainty exists, we are required to draw attention
in the auditor’s report to the related disclosures
in the consolidated financial statements and in
the group management report or, if such disclo-
sures are inadequate, to modify our respective
opinions. Our conclusions are based on the au-
dit evidence obtained up to the date of our audi-
tor’s report. However, future events or condi-
tions may cause the Group to cease to be able to
continue as a going concern.
— evaluate the overall presentation, structure and
content of the consolidated financial statements,
including the disclosures, and whether the con-
solidated financial statements present the under-
lying transactions and events in a manner that
the consolidated financial statements give a true
and fair view of the assets, liabilities, financial
position and financial performance of the Group
in compliance with IFRSs as adopted by the EU
and the additional requirements of German com-
mercial law pursuant to Section 315 e (1) HGB.
245
— obtain sufficient appropriate audit evidence re-
garding the financial information of the entities
or business activities within the Group to express
opinions on the consolidated financial state-
ments and on the group management report. We
are responsible for the direction, supervision
and performance of the group audit. We remain
solely responsible for our opinions.
— evaluate the consistency of the group manage-
ment report with the consolidated financial
statements, its conformity with [German] law,
and the view of the Group’s position it provides.
— perform audit procedures on the prospective in-
formation presented by management in the
group management report. On the basis of suf-
ficient appropriate audit evidence we evaluate,
in particular, the significant assumptions used
by management as a basis for the prospective
information, and evaluate the proper derivation
of the prospective information from these as-
sumptions. We do not express a separate opin-
ion on the prospective information and on the
assumptions used as a basis. There is a substan-
tial unavoidable risk that future events will dif-
fer materially from the prospective information.
We communicate with those charged with governance
regarding, among other matters, the planned scope
and timing of the audit and significant audit findings,
including any significant deficiencies in internal con-
trol that we identify during our audit.
We also provide those charged with governance with
a statement that we have complied with the relevant
independence requirements, and communicate with
them all relationships and other matters that may
reasonably be thought to bear on our independence,
and where applicable, the related safeguards.
From the matters communicated with those charged
with governance, we determine those matters that
were of most significance in the audit of the consoli-
dated financial statements of the current period and
are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter.
246
Independent
Auditor’s Report
Other Legal and Regulatory
Requirements
Further Information pursuant to Article 10 of the
EU Audit Regulation
We were elected as group auditor for the financial year
from 1 January to 31 December 2018 at the annual
general meeting on 17 May 2018. We were engaged
by the Audit Committee of the Supervisory Board
on 7 June 2018. Taking into account the transitional
provisions of Article 41 (2) of the EU Audit Regula-
tion, we have been the group auditor of Bayerische
Motoren Werke Aktiengesellschaft for more than 30
consecutive years.
We declare that the opinions expressed in this audi-
tor’s report are consistent with the additional report
to the Audit Committee pursuant to Article 11 of the
EU Audit Regulation (long-form audit report).
German Public Auditor Responsible
for the Engagement
The German Public Auditor responsible for the
engagement is Mr Andreas Feege.
Munich, 27 February 2019
KpMG AG
Wirtschaftsprüfungsgesellschaft
Sailer
Wirtschaftsprüfer
Feege
Wirtschaftsprüfer
[German Public Auditor]
[German Public Auditor]
Statement on Corporate Governance OTHER
INFORMATION
Page 248 BMW Group Ten-year Comparison
Page 250 Glossary – Explanation of Key Figures
Page 252 Index
Page 254 Index of Graphs
Page 255 Financial Calendar
Page 256 Contacts
5
5
Other
Information
Ten-year
Comparison
Glossary –
Explanation
of Key Figures
Index
Index of Graphs
Financial Calendar
Contacts
248
BMW Group
Ten-year
Comparison
BMW GROUP
TEN-YEAR COMPARISON
delIVerIeS
Automobiles
Motorcycles 2
produCtIon VoluMe
Automobiles
Motorcycles 2
fInAnCIAl SerVICeS
Contract portfolio
2018
2017 1
2016
2015
2014
2013
2012
2011
2010
2009
units
units
units
units
2,490,664
2,463,526
2,367,603
2,247,485
165,566
164,153
145,032
136,963
2,117,965
1,963,798
1,845,186
1,668,982
1,461,166
1,286,310
123,495
115,215
106,358
104,286
98,047
87,306
2,541,534
2,505,741
2,359,756
2,279,503
162,687
185,682
145,555
151,004
2,165,566
2,006,366
1,861,826
1,738,160
1,481,253
1,258,417
133,615
110,127
113,811
110,360
99,236
82,631
contracts
5,235,207
5,380,785
5,114,906
4,718,970
4,359,572
4,130,002
3,846,364
3,592,093
3,190,353
3,085,946
Business volume (based on balance sheet carrying amounts)
€ million
133,210
124,719
123,394
111,191
96,390
84,347
80,974
75,245
66,233
61,202
Business volume (based on balance sheet carrying amounts)
InCoMe StAteMent
Revenues
Gross profit margin
Earnings before financial result
Earnings before tax
Return on sales (earnings before tax / revenues)
Income taxes
Effective tax rate
Net profit for the year
bAlAnCe Sheet
Non-current assets
Current assets
Capital expenditure (excluding capitalised development costs)
Capital expenditure ratio (capital expenditure / revenues)
Equity
Equity ratio
Non-current provisions and liabilities
Current provisions and liabilities
Balance sheet total
CASh flow StAteMent
Cash and cash equivalents at balance sheet date
Free cash flow Automotive segment
perSonnel
Workforce at year-end 3
Personnel cost per employee
dIVIdend
Dividend total
€ million
97,480
98,282
94,163
92,175
80,401
76,059
76,848
68,821
60,477
50,681
%
€ million
€ million
%
€ million
%
€ million
€ million
€ million
€ million
%
%
€ million
€ million
€ million
19.0
9,121
9,815
10.1
2,575
26.2
7,207
20.3
9,899
10,675
10.9
2,000
18.7
8,675
19.9
9,386
9,665
10.3
2,755
28.5
6,910
19.7
9,593
9,224
10.0
2,828
30.7
6,396
125,442
121,964
121,671
110,343
83,538
5,029
5.2
27.8
79,983
70,909
73,542
4,688
4.8
54,107
27.7
69,634
71,765
66,864
3,731
4.0
47,363
25.1
73,183
67,989
61,831
3,826
4.2
42,764
24.8
63,819
65,591
€ million
58,088
208,980
195,506
188,535
172,174
154,803
138,377
131,835
123,429
110,164
101,953
€ million
€ million
10,979
2,713
9,039
4,459
7,880
5,792
6,122
5,404
7,688
3,481
7,671
3,003
8,370
3,809
7,776
3,166
7,432
4,471
7,767
1,456
134,682
€
101,178
129,932
100,760
124,729
122,244
99,575
97,136
116,324
110,351
105,876
100,306
92,337
89,869
89,161
84,887
95,453
83,141
96,230
72,349
€ million
2,303
2,630
2,300
2,102
1,904
1,707
1,640
1,508
852
197
Dividend per share of common stock / preferred stock
€
3.50 4 / 3.52 4
4.00 / 4.02
3.50 / 3.52
3.20 / 3.22
2.90 / 2.92
2.60 / 2.62
2.50 / 2.52
2.30 / 2.32
1.30 / 1.32
0.30 / 0.32
Dividend per share of common stock / preferred stock
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 Excluding Husqvarna, deliveries up to 2013: 59,776 units; production up to 2013: 59,426 units.
3 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.
4 Proposal by management.
21.2
9,118
8,707
10.8
2,890
33.2
5,817
97,959
56,844
4,601
5.7
37,437
24.2
58,288
59,078
20.1
7,978
7,893
10.4
2,564
32.5
5,329
86,193
52,184
4,967
6.5
35,600
25.7
51,643
51,134
20.2
8,275
7,803
10.2
2,692
34.5
5,111
81,305
50,530
4,151
5.4
30,606
23.2
52,834
48,395
21.1
8,018
7,383
10.7
2,476
33.5
4,907
74,425
49,004
2,720
4.0
27,103
22.0
49,113
47,213
18.1
5,111
4,853
8.0
1,610
33.1
3,243
67,013
43,151
2,312
3.8
23,930
21.7
46,100
40,134
10.5
289
413
0.8
203
49.2
210
62,009
39,944
2,383
4.7
19,915
19.5
45,119
36,919
delIVerIeS
Automobiles
Motorcycles 2
produCtIon VoluMe
Automobiles
Motorcycles 2
fInAnCIAl SerVICeS
Contract portfolio
InCoMe StAteMent
Revenues
Gross profit margin
Earnings before financial result
Earnings before tax
Income taxes
Effective tax rate
Net profit for the year
bAlAnCe Sheet
Non-current assets
Current assets
Return on sales (earnings before tax / revenues)
Capital expenditure (excluding capitalised development costs)
Capital expenditure ratio (capital expenditure / revenues)
Equity
Equity ratio
Non-current provisions and liabilities
Current provisions and liabilities
Balance sheet total
CASh flow StAteMent
Cash and cash equivalents at balance sheet date
Free cash flow Automotive segment
perSonnel
Workforce at year-end 3
Personnel cost per employee
dIVIdend
Dividend total
Other Information
2018
2017 1
2016
2015
2014
2013
2012
2011
2010
2009
2,490,664
2,463,526
2,367,603
2,247,485
165,566
164,153
145,032
136,963
2,117,965
1,963,798
1,845,186
1,668,982
1,461,166
1,286,310
123,495
115,215
106,358
104,286
98,047
87,306
2,541,534
2,505,741
2,359,756
2,279,503
162,687
185,682
145,555
151,004
2,165,566
2,006,366
1,861,826
1,738,160
1,481,253
1,258,417
133,615
110,127
113,811
110,360
99,236
82,631
contracts
5,235,207
5,380,785
5,114,906
4,718,970
4,359,572
4,130,002
3,846,364
3,592,093
3,190,353
3,085,946
249
delIVerIeS
Automobiles
Motorcycles 2
produCtIon VoluMe
Automobiles
Motorcycles 2
fInAnCIAl SerVICeS
Contract portfolio
Business volume (based on balance sheet carrying amounts)
€ million
133,210
124,719
123,394
111,191
96,390
84,347
80,974
75,245
66,233
61,202
Business volume (based on balance sheet carrying amounts)
€ million
97,480
98,282
94,163
92,175
80,401
76,059
76,848
68,821
60,477
50,681
21.2
9,118
8,707
10.8
2,890
33.2
5,817
97,959
56,844
4,601
5.7
37,437
24.2
58,288
59,078
20.1
7,978
7,893
10.4
2,564
32.5
5,329
86,193
52,184
4,967
6.5
35,600
25.7
51,643
51,134
20.2
8,275
7,803
10.2
2,692
34.5
5,111
81,305
50,530
4,151
5.4
30,606
23.2
52,834
48,395
21.1
8,018
7,383
10.7
2,476
33.5
4,907
74,425
49,004
2,720
4.0
27,103
22.0
49,113
47,213
18.1
5,111
4,853
8.0
1,610
33.1
3,243
67,013
43,151
2,312
3.8
23,930
21.7
46,100
40,134
10.5
289
413
0.8
203
49.2
210
62,009
39,944
2,383
4.7
19,915
19.5
45,119
36,919
208,980
195,506
188,535
172,174
154,803
138,377
131,835
123,429
110,164
101,953
€ million
€ million
10,979
2,713
9,039
4,459
7,880
5,792
6,122
5,404
7,688
3,481
7,671
3,003
8,370
3,809
7,776
3,166
7,432
4,471
7,767
1,456
134,682
€
101,178
129,932
100,760
124,729
122,244
99,575
97,136
116,324
110,351
105,876
100,306
92,337
89,869
89,161
84,887
95,453
83,141
96,230
72,349
€ million
2,303
2,630
2,300
2,102
1,904
1,707
1,640
1,508
852
197
InCoMe StAteMent
Revenues
Gross profit margin
Earnings before financial result
Earnings before tax
Return on sales (earnings before tax / revenues)
Income taxes
Effective tax rate
Net profit for the year
bAlAnCe Sheet
Non-current assets
Current assets
Capital expenditure (excluding capitalised development costs)
Capital expenditure ratio (capital expenditure / revenues)
Equity
Equity ratio
Non-current provisions and liabilities
Current provisions and liabilities
Balance sheet total
CASh flow StAteMent
Cash and cash equivalents at balance sheet date
Free cash flow Automotive segment
perSonnel
Workforce at year-end 3
Personnel cost per employee
dIVIdend
Dividend total
Dividend per share of common stock / preferred stock
€
3.50 4 / 3.52 4
4.00 / 4.02
3.50 / 3.52
3.20 / 3.22
2.90 / 2.92
2.60 / 2.62
2.50 / 2.52
2.30 / 2.32
1.30 / 1.32
0.30 / 0.32
Dividend per share of common stock / preferred stock
1 Prior year figures adjusted due to first-time application of IFRS 15, see note 6 to the Group Financial Statements.
2 Excluding Husqvarna, deliveries up to 2013: 59,776 units; production up to 2013: 59,426 units.
3 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.
4 Proposal by management.
units
units
units
units
%
%
%
€ million
€ million
€ million
€ million
€ million
€ million
€ million
%
%
€ million
€ million
€ million
19.0
9,121
9,815
10.1
2,575
26.2
7,207
83,538
5,029
5.2
27.8
79,983
70,909
20.3
9,899
10,675
10.9
2,000
18.7
8,675
73,542
4,688
4.8
54,107
27.7
69,634
71,765
19.9
9,386
9,665
10.3
2,755
28.5
6,910
66,864
3,731
4.0
47,363
25.1
73,183
67,989
19.7
9,593
9,224
10.0
2,828
30.7
6,396
61,831
3,826
4.2
42,764
24.8
63,819
65,591
125,442
121,964
121,671
110,343
€ million
58,088
delIVerIeS
Automobiles
Motorcycles 2
Automobiles
Motorcycles 2
produCtIon VoluMe
fInAnCIAl SerVICeS
Contract portfolio
InCoMe StAteMent
Revenues
Gross profit margin
Earnings before financial result
Earnings before tax
Income taxes
Effective tax rate
Net profit for the year
bAlAnCe Sheet
Non-current assets
Current assets
Return on sales (earnings before tax / revenues)
Capital expenditure (excluding capitalised development costs)
Capital expenditure ratio (capital expenditure / revenues)
Equity
Equity ratio
Non-current provisions and liabilities
Current provisions and liabilities
Balance sheet total
CASh flow StAteMent
Cash and cash equivalents at balance sheet date
Free cash flow Automotive segment
perSonnel
Workforce at year-end 3
Personnel cost per employee
dIVIdend
Dividend total
250
Glossary –
Explanation
of Key Figures
GLOSSARY – EXPLANATION
OF KEY FIGURES
Asset-backed financing transactions
A form of corporate financing involving the sale of
receivables to a financing company.
Bond
A securitised debt instrument in which the issuer
certifies its obligation to repay the nominal amount
at the end of a fixed term and to pay a fixed or variable
rate of interest.
Business volume in balance sheet terms
The sum of the balance sheet line items “Leased prod-
ucts” and “Receivables from sales financing” (current
and non-current), as reported in the balance sheet for
the Financial Services segment.
Capital expenditure ratio
Investments in property, plant and equipment and
other intangible assets (excluding capitalised
development costs) as a percentage of Group
revenues.
Capitalisation rate
Capitalised development costs as a percentage of
research and development expenditure.
Cash flow
Liquid funds generated (cash inflows) or used (cash
outflows) during a reporting period.
Commercial paper
Short-term debt instruments with a term of less than
one year which are usually sold at a discount to their
face value.
Consolidation
The process of combining separate financial state-
ments of Group entities into Group Financial State-
ments, depicting the financial position, net assets
and results of operations of the Group as a single
economic entity.
Credit default swap (CDS)
Financial swap agreements, under which creditors of
securities (usually bonds) pay premiums to the seller
of the CDS to hedge against the risk that the issuer of
the bond will default. As with credit default insurance
agreements, the party receiving the premiums gives
a commitment to compensate the bond creditor in
the event of default.
Earnings per share (EPS)
Basic earnings per share are calculated for common
and preferred stock by dividing the net profit after
minority interests, as attributable to each category of
stock, by the average number of shares in circulation.
Earnings per share of preferred stock are computed
on the basis of the number of preferred stock shares
entitled to receive a dividend in each of the relevant
financial years.
EBIT
Abbreviation for “Earnings Before Interest and Taxes”,
equivalent in the BMW Group income statement to
“Profit / loss before financial result”.
Cash flow at risk
Similar to “value at risk” (see definition below).
EBIT margin
Profit / loss before financial result as a percentage of
revenues.
Cash flow hedge
A hedge against exposures to the variability in fore-
casted cash flows, particularly in connection with
exchange rate fluctuations.
Effective tax rate
The effective tax rate is calculated by dividing the
income tax expense by the Group profit before tax.
Other Information 251
Return on capital employed (RoCE)
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.
Return on equity (RoE)
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.
Value at risk
A measure of the potential maximum loss in value of
an item during a set time period, based on a specified
probability.
Equity ratio
Equity capital as a percentage of the balance sheet
total.
Fair value
The amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing
parties in an arm’s length transaction.
Fair value hedge
A hedge against exposures to fluctuations in the fair
value of a balance sheet item.
Goodwill
Goodwill corresponds to the consideration paid to
acquire an entity, less the fair value of the separate
assets acquired and liabilities assumed. The buyer
is willing to pay the additional amount in return for
future expected earnings.
Gross margin
Gross profit as a percentage of Group revenues.
Liquidity
Cash and cash equivalents as well as marketable secu-
rities and investment funds.
Post-tax return on sales
Group net profit as a percentage of Group revenues.
Pre-tax return on sales
Group profit / loss before tax as a percentage of Group
revenues.
Research and development expenditure
The sum of research and non-capitalised development
cost and capitalised development cost (not including
the associated scheduled amortisation).
Research and development expenditure ratio
Research and development expenditure as a percent-
age of Group revenues.
252
Index
INDEX
A
Accounting policies
Apprentices
Automotive segment
61
B
Balance sheet structure
Bonds
74, 164
122 et seq.
48 et seq.
76
F
Financial assets
Financial instruments
Financial liabilities
Financial reporting rules
Financial result
67, 81
Financial Services segment
76, 83, 152 et seq.
168 et seq.
74, 77, 162 et seq.
129 et seq.
54 et seq.
G
Group tangible, intangible and investment
assets
146 et seq.
I
65, 81, 110 et seq., 139 et seq.
Income statement
Income taxes
Intangible assets
Inventories
Investments accounted for using the equity method
and other investments
67, 141 et seq., 161
123, 148
76, 83, 153
149 et seq.
C
5, 67 et seq.
70 et seq., 114 et seq.
4, 31 et seq., 46, 63 et seq., 88
223 et seq.
5, 71 et seq., 114 et seq.
Capital expenditure
Cash and cash equivalents
Cash flow
CO2 fleet emissions
Compensation Report
Compliance
Connected Drive
Consolidated companies
Consolidation principles
Contingent liabilities
Corporate Governance
Cost of materials
Cost of sales
218 et seq.
28
66, 139
78 et seq.
167
200 et seq.
D
27, 59
Dealer organisation /dealerships
Declaration with respect to the
Corporate Governance Code
Digitalisation
Dividend
22, 143 et seq.
Dow Jones Sustainability Index World
28, 59 et seq.
201
119 et seq.
119 et seq.
K
Key data per share
23
L
Lease business
Leased products
Locations
List of investments
34 et seq.
54 et seq.
148
190 et seq.
M
Mandates of members of the Board of Management
63
202
Mandates of members of the Supervisory Board
203 et seq.
Marketable securities
Motorcycles segment
71, 125
53
E
Earnings per share
5, 143
EBIT margin / return on sales
Efficient Dynamics
Employees
Equity
Exchange rates
4, 45, 61 et seq., 87
77, 154 et seq.
29
5, 37, 45 et seq., 88 et seq.
N
Net profit
5, 81
41 et seq., 86 et seq., 99, 121, 176 et seq.
Other Information O
140
146 et seq.
Other financial result
Other investments
Other operating income and expenses
Other provisions
Outlook
84 et seq.
161
T
Tangible, intangible and investment assets
140 et seq.
146 et seq.
Trade payables
Trade receivables
166
153
253
P
77, 83, 156 et seq.
4 et seq., 36 et seq., 45 et seq.,
143
Pension provisions
Performance indicators
87 et seq.
Personnel expenses
Production
Production network
Profit before financial result
Profit before tax
Property, plant and equipment
Purchasing
51 et seq.
58
32 et seq., 51 et seq.
5 et seq., 67
5 et seq., 45, 65, 66, 87, 89
148
R
151
180 et seq.
8 et seq.
28 et seq., 57
224 et seq.
22
73 et seq.
Rating
Receivables from sales financing
Refinancing
Related party relationships
Remuneration system
Report of the Supervisory Board
Research and development
Revenue reserves
Revenues
Risks and opportunities
RoCE
RoE
5, 37 et seq., 46 et seq., 88
5, 37 et seq., 47, 88
154
90 et seq.
5, 45 et seq., 65 et seq., 68 et seq., 81, 139
S
4, 46 et seq., 48 et seq., 53, 88 et seq.
184 et seq.
Sales volume
Segment information
Selling and administrative expenses
Statement of Comprehensive Income
Stock
Sustainability
30 et seq., 63 et seq.
20 et seq.
67, 140
110, 145
254
Index of Graphs
Financial Calendar
INDEX OF GRAPHS
Finances
BMW Group in figures
Development of BMW AG stock
36
BMW Group value drivers
Contract portfolio of Financial Services segment
20, 21
6
54
54
BMW Group new vehicles financed or leased by
Financial Services segment
Contract portfolio retail customer financing of
Financial Services segment 2018
Development of credit loss ratio
Regional mix of BMW Group purchase volumes
2018
BMW Group change in cash and cash equivalents
55
55
58
71
BMW Group composition financial liabilities
BMW Group financial liabilities by maturity
Balance sheet structure – Group
Balance sheet structure – Automotive segment
79
BMW Group value added 2018
Risk management in the BMW Group
76
90
74
74
76
Sales volume and locations
BMW Group locations
BMW Group – key automobile markets 2018
BMW Group deliveries of motorcycles
53
BMW Group – key motorcycle markets 2018
34 et seq.
48
53
Workforce
BMW Group apprentices at 31 December
62
Employee attrition rate at BMW AG
Proportion of female employees in management
functions at BMW AG / BMW Group
Proportion of female executives within manage-
215
ment / function levels I and II at BMW AG
61
62
Further information
Exchange rates compared to the euro
Oil price trend
Precious metals price trend
Steel price trend
BMW Group Compliance Management System
41
42
42
43
218
Overview of compensation system of the Board
of Management: cash benefits and pension
contribution
Overview of compensation system of the Board
of Management: variable remuneration
224
224
Other Information FINANCIAL CALENDAR
255
2019
20 March 2019
Annual Accounts Press Conference
21 March 2019
Analyst and Investor Conference
7 May 2019
Quarterly Report to 31 March 2019
16 May 2019
Annual General Meeting
1 August 2019
Quarterly Report to 30 June 2019
6 November 2019
Quarterly Report to 30 September 2019
2020
18 March 2020
Annual Report 2019
18 March 2020
Annual Accounts Press Conference
19 March 2020
Analyst and Investor Conference
6 May 2020
Quarterly Report to 31 March 2020
14 May 2020
Annual General Meeting
5 August 2020
Quarterly Report to 30 June 2020
4 November 2020
Quarterly Report to 30 September 2020
256
Contacts
CONTACTS
Business and Finance Press
Telephone + 49 89 382-2 45 44
+ 49 89 382-2 41 18
+ 49 89 382-2 44 18
presse@bmwgroup.com
Fax
E-mail
Investor Relations
Telephone + 49 89 382-2 53 87
+ 49 89 382-1 46 61
Fax
ir@bmwgroup.com
E-mail
www.bmwgroup.com.
The BMW Group on the Internet
Further information about the BMW Group is
available online at
Investor Relations information is available directly
at
Information about the various BMW Group brands
is available at
and
www.bmw.com,
www.rolls-roycemotorcars.com
www.bmwgroup.com / ir.
www.mini.com
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This version of the Annual Report is a translation
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version is binding.
Other Information
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Bayerische Motoren Werke
Aktiengesellschaft
80788 Munich
Germany
Telephone +49 89 382-0