FRANKFURT -- BMW expects headwinds from U.S. President Donald Trumps trade war with China as well as higher commodity prices and foreign exchange swings to weigh on earnings next year by at least 1 billion euros ($1.1 billion).

In some of its first comments on expectations for 2019, BMW laid out an array of hurdles that will drag down profit, while high-margin models will only boost performance toward the end of the year.

“Our strategic profitability target of between 8 percent and 10 percent remains unchanged,” CFO Nicolas Peter said in a speech to investors on Monday. “Whether we achieve this in 2019 will depend on many different factors.”

The effect of U.S. and China tariffs will lead to a charge in the “mid-three-digit-million euro range,” he said. Exchange rates and commodity prices will likely continue their “negative development,” Peter said.

These issues are expected to burden results in a range of mid- to high-3-digit-million euros.

Because of tougher environmental regulations, BMW is forced to pack more technology in its cars, Peter said. That increases costs for equipment that customers don’t necessarily pay for.

Goodwill and warranty issues that hit third-quarter earnings will have an impact in the fourth quarter as well. To offset higher expenses and maintain its investment in new technology, BMW is reducing the number of engine variants and looking at other ways to rein in costs

The lackluster outlook for 2019 will put further pressure on BMW CEO Harald Krueger to respond, as the company’s record model offensive has yet to show tangible results.

The headwinds laid out by BMW show the difficulties weighing on traditional carmakers, which are tasked with investing vast sums on self-driving, electric cars while navigating increasingly volatile markets.

Source: Autonews

December 4, 2018