(new: share price, management statements)

MUNICH (dpa-AFX) - Car manufacturer BMW is planning the highest investments in its history this year and therefore expects a slight decline in profit before tax. CFO Walter Mertl said on Thursday that with the construction of battery factories in Bavaria, China, Mexico and the USA, the construction of the car plant in Hungary and the start of production of the "New Class" e-cars, investments and research and development costs are rising "to a new level".

BMW sold 2.55 million cars last year, generating a turnover of 155.5 billion euros and a pre-tax profit of 17.1 billion euros. This year, car sales are expected to increase slightly, with all-electric (BEV) and luxury cars as growth drivers. As a result, turnover will also grow, said Mertl. BMW is aiming for an earnings margin in its core business of between eight and ten percent of sales, compared to 9.8 percent last year.

BMW shares lost 0.7 percent to 105.62 euros at midday in a slightly friendly market. UBS analyst Patrick Hummel considered the Group's free cash flow targets for the auto division to be somewhat disappointing. These also limited the opportunities for accelerated share buybacks. After a cash inflow of 6.9 billion euros last year, BMW is aiming for a figure of more than 6 billion this year. Overall, the outlook is mixed, wrote expert Hummel.

BMW will continue to flexibly invest available funds in share buybacks as part of its dividend policy, said CFO Mertl. The policy of distributing a dividend of 30 to 40 percent of profits would remain in place. Further measures would depend on the cash situation, said the manager.

In February, rival Mercedes-Benz formally agreed on a guideline regarding the buyback of its own shares. According to this, the Swabians not only want to pay out around 40 percent of net profit as a dividend as before, but if there is any money left over from the free cash flow from the vehicle business, they want to regularly invest it in a share buyback. Share buy-backs are often well received on the financial market because the redemption of shares mathematically increases the profit share per share and this can drive up the valuation per share.

The further fall in used car prices is also likely to contribute to the decline in profits in the current year, said Mertl. This will reduce the result in the leasing business. However, the main reason for the fall in profits is the increase in investments to more than 6 percent of turnover and research and development costs to more than 5 percent. The upper limit of the target corridor at BMW is actually less than ten percent.

At the annual press conference, BMW presented its first SUV vision vehicle based on the New Class platform. The car is due to roll off the production line at the new Hungarian plant in Debrecen next year. Chairman of the Board of Management Oliver Zipse said that the New Class is "the redefinition of the BMW brand".

Board Member for Development Frank Weber said that for customers it means 30 percent more range and 30 percent faster charging speed compared to a current electric BMW. For the company, it means a good 40 percent lower costs for the drivetrain. The battery cars (BEV) of the New Class are based on a pure electric platform. However, the design and the new, faster on-board network of the New Class will also be used for the future combustion engines. Instead of dozens of control units, there are now only four, which will be installed in all New Class cars.

For the New Class, BMW is making the largest investment in the company's history with the aim of achieving the same level of cost and profitability as a combustion engine with its e-cars. With the increasing share of New Class BEVs, the profit margins of BEVs and combustion engines are gradually converging, said Mertl. Equality could be achieved by the end of the decade, said Weber. However, raw material prices would also have to "move along normal lines". Nobody knows what lithium and other battery raw materials will cost in two years' time.

On the question of the end of the combustion engine, Weber said that the range of electric vehicles and, above all, charging were the biggest hurdles for car buyers. There are now e-car customers who are returning to plug-in hybrids. The charging infrastructure, green electricity for the construction and operation of the cars and the recycling of battery raw materials are necessary for a successful transition. This will not happen overnight. With regard to the EU guidelines, Zipse warned that the goal must be maximum climate impact, not a specific technology. Sometimes, however, "the arguments are almost ideological".

CFO Mertl explained that in addition to the Debrecen car plant and the four battery assembly plants, the expansion of the Munich plant and the electrification of the Mini plant in Oxford also led to the high level of investment.

In terms of sales, BMW expects electric and luxury cars to be the drivers with double-digit growth rates. The Group has 15 BEV models on offer and aims to sell more than half a million BEV cars this year. Last year, BMW undercut the CO2 fleet value of 128.5 grams of CO2 per kilometer prescribed by the EU by more than 20 percent with 102.1 grams. Worldwide, BMW has a market share of 3.3 percent, but the Munich-based company already has 4.1 percent of all-electric cars./rol/men/stw/jha/