Statement of the Chairman of the Board of Management

Norbert Reithofer
Chairman of the Board of Management

Dear Shareholders,

Your Company has once again demonstrated a strong performance with new sales volumes, revenues and earnings highs for the 2012 financial year.

At the BMW Group, we look to the future and are prepared to go against the trend, if need be; we have the stamina to stick to our chosen path. For us, it is always the customer who comes first – that is why we offer innovative products and services and what makes us the world’s top-selling premium car manufacturer. But we aim to do even better – which means continuing to grow at a profitable rate and acting in a responsible manner as a member of society.

Our actions are based on our tradition, our values and our Company’s unique corporate culture and team spirit. At the BMW Group, we all share a passion for mobility. It is our common purpose to make individual mobility viable for the future, as the demands on cars continue to evolve. Our industry is in a period of transition – what we refer to as “iconic change”. We are driving and shaping this technological shift towards sustainable mobility. It will require all our powers of innovation in the development of new products and attractive mobility services, as well as constant review of our structures and processes and how we work together.

2012 – the most successful year in the history of the Company.

Our success is built on the desirability of our products. More than 1.84 million BMW, MINI and Rolls-Royce vehicles were delivered to customers in 2012, beating the previous year’s record by more than 10 %. All three of our automobile brands set new records. In addition, more than 117,000 customers purchased a BMW or Husqvarna motorcycle. Our Financial Services business also continued to grow and contributed to the positive performance in sales figures.

Thanks to strong demand for our premium vehicles, revenues rose to more than € 76.8 billion and profit before tax increased to around € 7.8 billion in the 2012 financial year – both new highs for the Group. The net profit of more than € 5.1 billion also represented a new record.

Our financial success allows us the necessary freedom to continue investing in our future. In 2012, our research and development expenses rose to more than € 3.9 billion, mostly in connection with projects to secure our future growth.

Our figures for 2012 are the result of an outstanding collective performance. On behalf of the Board of Management, I would like to thank all of our employees for their efforts, determination and achievements in 2012. I would also like to thank our retail organisation, our suppliers and our business partners, who play such an important part in the Company’s success.

Five years of Strategy Number ONE: interim targets for 2012 fulfilled.

The success of the 2012 financial year is also the result of the long-term decisions we made as part of our Strategy Number ONE.

We presented our strategy to the public back in autumn 2007 – with a vision for the year 2020. The aim is to prepare the BMW Group for the future, as it faces a wide range of different challenges in a changing environment for individual mobility. Specific measures were implemented in the four strategic areas of “Growth”, “Shaping the future”, “Profitability” and “Access to technology and customers”. We also set ourselves ambitious interim targets for 2012, including much greater efficiency and higher profitability. For the Automotive segment, we defined an EBIT margin target of between 8 % and 10 %.

What have we achieved during the first five years of Number ONE?

  • We have become more profitable, and doubled our profit before tax between 2007 and 2012. At the end of 2012, our EBIT margin in the Automotive segment was above our 8 % and 10 % target range.
  • The price of BMW common stock climbed more than 70 % from the end of 2007 to the end of 2012, while Germany’s DAX fell by 5.6 % over the same period.
  • We have leveraged much more than the € 6 billion in efficiency potential originally targeted.
  • In 2007, Efficient Dynamics was already the best technology on the market for lowering fuel consumption and CO2 emissions. Back then, we had 27 BMW and MINI models with 140 grams of CO2 per kilometre or less. By the end of 2012, the BMW Group fleet included 73 models at or below this level. Our core model series – the BMW 3 Series, the BMW 5 Series and the BMW 7 Series – are also available as full hybrids. Efficient Dynamics continues: we aim to reduce the CO2 emissions of our vehicle fleet by at least another 25 % between 2008 and 2020.
  • We have systematically expanded our global production network since 2007 – from 23 production facilities in twelve countries to 29 locations in 14 countries by the end of 2012. The most recent example is our new Tiexi plant in Shenyang, which we have been operating with our joint venture partner, Brilliance, since 2012. When we plan a site, we ensure that it sets new standards: Tiexi is the most sustainable vehicle plant in China today and one of the most advanced in the world.

Over the past five years, our strategy has proven robust, and shown the way forward under changing external conditions: during the global financial and economic crisis of 2008 and 2009, the BMW Group still showed a profit and paid a dividend. In 2010 and 2011, we steered our Company back on track for success – initially helped by an economic tailwind, but then maintaining our performance in a challenging and volatile environment in 2012.

This clearly shows that we have reached the first major milestone in our strategy. We have fulfilled all the interim targets of our Strategy Number ONE for the year 2012 – and, in some cases, exceeded them. We delivered on our promises. Today, the BMW Group is a stronger, more international and more future-oriented company than it was when we embarked on our Strategy Number ONE. Above all else, the BMW Group is an attractive investment – and I would like to thank you, our shareholders, for supporting us on this journey.

It is in all our interests that the BMW Group not only has a successful present, but, even more importantly, a promising future. For that reason, we are now working towards the next major milestone in our strategy.

Number ONE still our corporate compass – next milestone in 2016.

In 2016, we will celebrate 100 years of BMW. By then, we aim to sell well over two million BMW, MINI and Rolls-Royce brand vehicles – with BMW Motorrad and Financial Services also continuing to contribute to our success. Profitability is, and will remain, the foundation upon which we build and shape our future.

In the 2013 financial year, we aim to continue on our successful course, targeting record sales at Group level. The main risks and uncertainties for our business stem from the volatility in our environment, the high level of public-sector debt and the uneven performance of the automobile markets.

We remain confident. In 2013, all three automobile brands and BMW Motorrad will bring new and revised models onto the market. In addition to that:

We are putting electromobility on the road.

Late 2013 heralds a new era of premium mobility: we will launch the pure electric BMW i3, our solution for emissions-free driving in urban areas. At the same time, customers will be able to purchase their charging current from renewable energies.

Production of the BMW i family sets new standards for resource conservation and the use of innovative materials, such as carbon fibre, in automobile manufacturing. In 2012, the BMW Group was named industry leader in the Dow Jones Sustainability Index for the eighth consecutive year – and therefore remains the world’s most sustainable car company.

At Bayerische Motoren Werke, we have a clear vision: to be a leader in the future development of individual mobility. We believe in the potential of electromobility – not least in order to meet ambitious CO2 emissions reduction targets in the EU and worldwide. In this regard, we are collaborating with Toyota Motor Corporation in the field of sustainable mobility. In early 2013, we signed an agreement to establish cooperation on fuel cells, lightweight construction technologies and the development of a sports car.

Employees are our most important success factor.

The most important requirement for a successful future is our motivated and dedicated employees – and, not least, our young talents. For this reason, we increased the number of apprentices in Germany by about 10 % last year. No fewer than 1,376 young people embarked on a career with the BMW Group at the start of the 2012 training year, and the total number of apprentices reached 4,266 at the end of 2012. Last year alone, we invested more than € 280 million in vocational and professional training to provide our employees with the qualifications they need for technological change.

We are convinced that our investments in all areas today will enable your Company to be well positioned to face the future. We hope we can count on your continued trust and support as we move forward.

Norbert Reithofer
Chairman of the Board of Management

Updated March 13, 2012