Quarterly Report to 30 September 2008

Interim Group Management Report

(PresseBox) ( München, )
The performance of the BMW Group in the third quarter 2008 was perceptibly influenced by the economic downswing in the wake of the financial crisis. Ongoing consumer reticence in the main sales markets, the weak state of the used car markets as well as increasing refinancing costs had a substantial negative impact on the earnings of the BMW Group.

Model life-cycle factors affect car sales volumes
In addition to the ongoing adverse business climate, the BMW Group's third-quarter performance was also influenced by model life-cycle factors, particularly in relation to the BMW brand. Between July and September 2008, the BMW Group sold a total of 349,098 BMW, MINI and Rolls-Royce brand cars, 4.2 % down on the previous year. The number of cars delivered in the nine-month period increased marginally (+ 1.7 %) to 1,113,972 units.

Market conditions for the motorcycle business were also difficult. The third-quarter sales volume achieved by the Motorcycles segment was nevertheless ahead of the previous year's high level. In total, 24,818 motorcycles were sold during the period (+ 5.4 %). During the first nine months of the year, 80,750 BMW motorcycles were handed over to customers, 2.5 % short of the number sold in the corresponding period of 2007.

In the Financial Services segment a total of 2,971,437 (+ 17.0 %) lease and financing contracts with dealers and retail customers were in place at 30 September 2008.

Negative impact of financial crisis on revenues and earnings
Third-quarter Group revenues decreased by 8.6 % to euro 12,588 million, reflecting the noticeable reluctance of customers to spend in the face of the crisis on international financial markets. Despite this extremely unfavourable situation, the BMW Group, with revenues of euro 40,425 million, was nevertheless able to maintain nine-month revenues at the previous year's high level. Adjusted for exchange rate factors, Group revenues for the nine-month period were up by 5.1 %.

Earnings for the nine-month period reflect the ongoing effect of the various adverse external factors described above. In the third quarter 2008, the BMW Group increased the cumulative amount of expense recognised for additional risk provision for residual value and bad debt risks to a total of euro 1,037 million. On top of this, expenditure in conjunction with previously announced measures to reduce the workforce reduced nine-month earnings by euro 258 million.

The third-quarter profit before financial result fell by 60.2 % to euro 387 million. The profit before financial result for the nine-month period, at euro 1,639 million, also dropped steeply (- 43.6 %).

External factors also took their toll on the Group's pre-tax earnings. The profit before tax of euro 279 million for the third quarter was 63.5 % lower than one year earlier, while that for the nine-month period fell to euro 1,522 million (- 43.3 %).

The BMW Group recorded a net profit of euro 298 million for the third quarter (- 62.9 %). The net profit for the nine-month period was 39.7 % lower at euro 1,292 million.

BMW Group sells majority shareholding in Cirquent
Effective 30 September 2008, the BMW Group sold 72.9 % of its shares in the IT consultancy company Cirquent (formerly Softlab) to the Japanese company NTT Data. The BMW Group continues to hold 25.1 % of the shares. The remaining two percent of shares are held by Cirquent itself.

BMW Group workforce reduced according to plan
The previously announced measures to reduce the size of the workforce within the BMW Group are being implemented as scheduled. The BMW Group had 103,625 employees worldwide at the end of the period under report. Since the end of the previous financial year, the workforce has been reduced by 3.8 %. This figure includes 1,778 employees of the Cirquent Group.

BMW Group launches numerous new models
The revised models of the BMW 3 Series Limousine and the BMW 3 Series Touring have been available on European markets since the end of September. In addition to specific design modifications and further refinements to the interior layout, both of the new models feature re-engineered engines and a number of innovations in the areas of drive technology, safety and comfort. The new BMW 7 Series will be available to customers from November 2008 onwards. The new BMW 7 Series generation includes numerous technical innovations in the areas of driver assistance and driving dynamics systems. It is also equipped with the full range of EfficientDynamics technology. The new Rolls-Royce Phantom Coupé has also been available on the markets since September.

The BMW Group presented three concept vehicles at the Paris Motor Show in September: the BMW Concept X1, the BMW Concept 7 Series ActiveHybrid and the MINI Crossover Concept. The BMW Concept X1 brings the functionality and versatility of a sports activity vehicle (SAV) to the premium compact class. The MINI Crossover Concept expands the MINI model family with a completely new vehicle concept, combining spaciousness and versatility with a four-wheel drive system.

Innovative drive concepts for BMW and MINI
With the BMW 7 Series ActiveHybrid and the BMW X6 ActiveHybrid, two models employing the highly efficient ActiveHybrid technology in series cars will become available for the first time in 2009. In October, the BMW Group announced the introduction of a fleet of approximately 500 purely electrically powered MINI cars for everyday use. This model will be driven by an electric motor which derives its energy from a lithium-ion battery and transfers its power emission-free and practically noiselessly.

Motorcycle range expanded
Three new models were presented at the INTERMOT international motorcycle show at the beginning of October. The K 1300 S, the fastest and most powerful BMW motorcycle ever built, celebrated its world debut. The K 1300 S features a high degree of handling precision and agility, without compromising any of the safety and ecologically compatible standards that are typical for BMW motorcycles. The drive system and suspension of this model have also been used in the new K 1300 R. This roadster is one of the most powerful in its segment. In addition to its sporty riding dynamics, the third new model, the K 1200 GT, also fulfils the highest standards of both comfort and safety. With its enhanced fairing design, this motorcycle is ideal for long distances and displays great dynamics when touring. The BMW Group also presented the racing version of the S 1000 RR, which will be ridden at the Superbike World Championship in 2009.

The new BMW G 450 X has also been available since September. The BMW G 450 X is an innovative sports enduro machine for ambitious motor sports enthusiasts. This motorcycle also meets state-of-theart environmental standards and is fully equipped with everything necessary for road registration in the series version.

Slowdown on international automobile markets
The global economic slowdown also stamped its mark on the international automobile markets during the first nine months of 2008. The major traditional car markets have been affected particularly badly, whereas growth in most of the emerging economies remained relatively high.

Passenger car sales in the USA have slumped dramatically since the beginning of the year. The decrease on this market has meanwhile moved into the double-digit range. In Western Europe, countries such as Spain and the United Kingdom, which are suffering from weak property markets, have been particularly hard hit. By contrast, Germany and France have been able to buck the trend, recording a small increase in car sales. Up to now, the Japanese market appears to have been affected to a lesser degree by the financial crisis, with sales volumes hovering at prior year levels.

Automobile markets in most emerging economies have not so far reacted significantly to the financial crisis. The Russian market in particular grew by about a third compared with the first nine months of the previous year. Car sales in China and India also expanded again at a double-digit pace, albeit noticeably lower than in the previous year. The new EU member countries returned to more moderate growth rates.

International motorcycle markets remain weak Most of the main motorcycle markets in which the BMW Group operates again performed poorly during the first nine months of 2008. Motorcycle sales worldwide for the nine-month period were down by approximately 4.1 %. In Europe, the Group's main motorcycle market - the 500 cc plus market - contracted by 5.8 % compared to the corresponding period last year. Some markets, in particular Italy (- 8.5 %), Germany (- 6.8 %), the United Kingdom (- 5.2 %) and Spain (- 14.5 %) saw sales figures well below those of the previous year. The only market to perform well was that of France where a growth rate of 4.3 % was recorded. The US motorcycle market contracted by 3.7 %, while the Japanese market registered a drop of 6.1 %.
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