Statement Walter Mertl Member of the Board of Management of BMW AG, Finance Conference Call Half-Year Report to 30 June 2023

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Ladies and Gentlemen, Good Morning!

Slide 2: BMW Group Half-Year Report to 30 June 2023.

I am very pleased to be able to present the BMW Group’s quarterly
results to you for the first time today.

Slide 3: Highlights of BMW Group Performance in Q2 and H1

In the second quarter of 2023, the BMW Group delivered a solid
performance under difficult conditions. The Group EBT margin came in
at 11.3% for the quarter and 12.6% for the first half-year. In the
Automotive Segment, we achieved an EBIT margin of 9.2% in the second
quarter and 10.6% for the half-year to the end of June.

We expect the positive business trend to continue in the second half
of the year, particularly due to the ongoing strength of the order
bank and an expected improvement in the availability of vehicles.

As a result, we communicated an increase in our deliveries forecast
for the 2023 financial year as part of an ad hoc announcement on
Tuesday. In addition, we raised the guidance for the EBIT margin and
return on capital employed (RoCE) in the Automotive segment, as well
as the outlook for return on equity (RoE) in the Financial Services segment.

I’d now like to take you through our financial figures for the second
quarter in more detail. To do so, I’ve brought along a few slides with
important key figures to explain the main developments and relevant
influencing factors.

Let’s start with the Group.

Slide 4: BMW Group in Q2

Group earnings before tax for the quarter totalled just under 4.2
billion euros. The EBT margin came in at 11.3% in the second quarter
and 12.6% for the first six months. This is clearly above our
strategic target of 10%.

Group pre-tax earnings for the first half-year decreased by just
under 6.8 billion euros. However, we must not forget that we had a
one-off profit of 7.7 billion euros last year due to the fair market
valuation of BBA equity interests. If we factor out this effect and
look at the underlying operating result instead, Group earnings were
significantly higher year-on-year.

Now I’d like to look at the individual segments, starting with the
Automotive segment.

Slide 5: Automotive Retail units, BEV units, Auto revenue and
Auto EBIT

Here you can see sales, revenue and earnings development in the
Automotive Segment over the past six quarters.

In Q2 2023, vehicle sales were up 11.3% on the prior-year quarter, at
just over 626,000 units. Compared to the first quarter, sales rose
6.4%. All regions contributed, and we were able to achieve a good
balance. Deliveries through the end of June were 4.7% higher year-on-year.

The order bank for our vehicles remains high. As a result of our
strong market position, we expect a positive trend in deliveries in
the second half of the year as well. We therefore now forecast a solid
increase in deliveries in 2023.

Our BEVs contributed to this development, and we see continued strong
momentum. In Q2, we sold more than 88,000 all-electric vehicles. On
top of the figure of nearly 64,000 units sold in the first quarter,
this adds up to around 153,000 BEVs delivered in the first six months.
That is more than double our BEV sales for the same period of last
year and represents 12.6% of total sales.

The BEV share of overall sales already hit 14% in the second quarter
and will reach 15% for the full year.

The growth in sales and strong product mix increased revenues in the
Automotive Segment – which, after six months, were up 10.9% on the
previous year. Roughly half of this increase resulted from the full
consolidation of BBA revenues in 2023. In 2022, the revenues of our
BBA joint venture were only included with the full consolidation from
11 February onwards.

In the box on the bottom right, you can see how the operating result
(EBIT) has developed in the Automotive Segment.

In the second quarter, EBIT totalled around 2.9 billion euros, with
an EBIT margin of 9.2%. Without depreciation of BBA assets from the
purchase price allocation, the margin was 10.2%.

For the year to the end of June, the EBIT margin was 10.6%, and 11.7%
without the depreciation of BBA assets from the purchase price allocation.

I’d like to use the next slide to explain the operating result in the
Automotive Segment in more detail.

Slide 6: Automotive Segment EBIT in Q2

The bridge starts on the left with Q2 of last year, with an EBIT of
2.5 billion euros and an EBIT margin of 8.2%.

From Q2 2022 to Q2 2023, we see a headwind of around 300 million
euros from the net balance of currency and raw material positions.
This is due mainly to currency translation effects from the
development of the US dollar, the Chinese renminbi and the Japanese
Yen. Raw material prices remain at the same high level as a year ago.

Together, volumes, the model mix and strong pricing generated a
tailwind of half a billion euros. The mix is stable overall, with
solid volumes in the upper segment. We are seeing positive impulses
from the X5 and X1, among others. While we are seeing the first signs
of normalization on the market, we remain focused on price discipline.

Expenses for research and development rose year-on-year to around 300
million euros – mainly in connection with investments in
electrification, digitalisation and automated driving.

The BMW Group’s R&D expenditure is determined by adjusting
R&D expenses for capitalisation and scheduled depreciation. This
forms the basis for the calculation of the R&D ratio according to
the German Commercial Code. The ratio for the year to the end of June
came in at 4.6%. For the full year, we expect the ratio to be within
our long-term target range of 4 to 5%.

Sales and administrative costs increased by around 100 million euros,
due to higher expenses for personnel and digitalisation projects,
amongst other things. As for the item ‘other cost changes’, we see
burdens from higher material costs on the one hand. Additionally, we
reassessed warranty provisions in the second quarter and updated
several parameters. This adjustment resulted in higher warranty costs
in Q2. On the other hand, the development of licensing revenues had a
positive effect in Q2.

The full consolidation of BBA also resulted in a positive
reconciliation item. The negative impact of BBA consolidation effects
was 800 million euros higher in Q2 2022 than in Q2 2023. This included
both depreciation on inventory from the purchase price allocation and
the elimination of interim profits in connection with intra-Group deliveries.

Slide 7: Automotive Segment Free Cash Flow in Q2

Free cash flow in the Automotive Segment totalled 1.2 billion euros
in the second quarter. The effect from working capital, totalling 2.4
billion euros, largely resulted from the increase in inventory. Global
demand for our vehicles and our order bank remain high. We ensure the
availability of the right products and thus fulfil the wishes of our
customers, while reducing waiting times. In doing so, we will maintain
our profitable growth in the second half of the year.

The delta from capital expenditure and depreciation improved free
cash flow in the second quarter by half a billion euros.

We continue to invest in the mobility of the future with our focus on
electromobility, digitalisation and automated driving. The capex ratio
came in at 5.1% for Q2 and 4.4% for the first half-year. We expect the
ratio for the full year to be around 6%. Allocation to provisions
increased free cash flow by around 500 million euros in Q2. Through
the first six months of the year, free cash flow in the Automotive
segment totalled 3.1 billion euros. For the full year 2023, we expect
a free cash flow of at least 6 billion euros.

In addition to higher investments for the transformation to
e-mobility, we are planning for increased inventories in 2023 compared
to the end of 2022. We plan across the years to ensure the necessary
vehicle supply to the markets in order to fulfil high customer demand.

Slide 8: Financial Services Segment in H1

Let’s turn now to the Financial Services Segment.

Earnings in the segment result not only from new business, but
largely from the entire portfolio of contracts. For this reason, I
will focus primarily on a six-month perspective for Financial Services.

Higher interest rates resulted in noticeably increased financing
costs for consumers. The financial services sector also remains as
competitive as ever. Therefore, in the year to the end of June, the
number of new financing and leasing contracts concluded with retail
customers decreased by 10.6%.

However, there was a noticeable positive trend in the second quarter,
since new contracts were at the same level as in the previous year’s
quarter. Higher prices and an improved product mix in the automotive
business led to an increase in the average financing volume. As a
result, the volume of new business in Q2 was 3.3% higher than in the
same quarter of the previous year.

Segment earnings before tax at the end of June amounted to 1.7
billion euros – a decrease of 14% compared to the first half of 2022.
The main reasons for this are higher refinancing costs and a smaller
total portfolio compared with the previous year. On a positive note,
income from the resale of end-of-lease vehicles is still high. In
addition, the risk situation in the segment remains mostly stable. A
credit loss ratio of 0.15% confirms the high quality of our portfolio.

We anticipate that the positive effects from the remarketing of lease
returns will remain stable through to the end of this financial year.
We therefore now expect a return on equity (RoE) in the range of 16 to
19% for the full year.

Slide 9: Motorcycles Segment in Q2

Let’s move on to the Motorcycles Segment.

For the past hundred years, the BMW Motorrad brand has offered an
impressive range of attractive products. Its strong portfolio
contributed to a successful second quarter in 2023 with record figures
in deliveries and EBIT margin. Sales reached almost 65,000 units and
were therefore 8.0% higher than the prior-year quarter.

The segment also significantly increased its operating result,
compared to the second quarter of 2022: growing from 127 million euros
to 158 million euros.

The EBIT margin was 16.0% for the quarter and 16.2% for the half-year.

Slide 10: Outlook 2023

This brings me to the overview of our guidance for financial year 2023.

– In the Automotive segment, we now expect deliveries to show a solid
increase over the previous year.

– As a result of the positive volume development, we now expect the
EBIT margin in the Automotive segment to be within the range of 9 to 10.5%.

– Accordingly, we raised the target range for segment RoCE to between
18 to 22%.

– And we now forecast Return on Equity in the Financial Services
segment to be between 16 and 19% over the year.

All other guidance figures remain unchanged.

Our forecast does not take into account a deep recession in key sales markets.

Furthermore, in our outlook, we do not expect further escalation of
the conflict between Russia and Ukraine or an expansion of the war.

Slide 11: BMW Group has the strategic focus and operational
excellence to deliver continued success for all stakeholders.

Ladies and Gentlemen,

Our industry is in the midst of a profound change. We are steering
the BMW Group profitably through this transformation with sound
financials. In doing so, we always focus on the long-term success of
our company.

Our strategic focus is on electromobility, digitalisation and
sustainability. To this end, we are making necessary investments in
next-generation technologies. We are maintaining our course in our
current core business. Operationally, we are strong, and that secures
our profitability. We have the necessary latitude to invest in the
future of the company and, at the same time, create value for our shareholders.

The BMW Group has a young, highly attractive product line-up on the
market – with an array of new models to come over the next few years.

With the NEUE KLASSE, we will shape the future of mobility and secure
our competitiveness, and our financial performance.

The BMW Group maintains the right balance between the three core
elements of its business success:

–       First: a profitable core business

–       Second: a continuing growth trajectory; and

–       Third: a clear path to lower CO2 emissions

This is how we can continue to create value for the BMW Group.

We deliver on our promises. That is our pledge – and something I am
personally committed to.

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