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The Inadequate Driving Machine

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What’s going on?

German car manufacturer BMW may have reported rising third-quarter sales on Wednesday, but the carmaker hasn’t exactly lived up to its ultimate reputation: it’s expecting a “significant decrease” in its profit for 2019 as a whole.

What does this mean?

After a series of setbacks earlier this year – both operational and regulatory – BMW reported an 8% increase in sales and an 11% jump in third-quarter profit versus a year ago. But profit for the year is down 37% so far, and between Brexit uncertainty, trade war tensions, and a global economic slowdown, the carmaker isn’t expecting any miracles this quarter either. Adding pressure to profitability is BMW’s need – whether due to regulation or competition – to invest big in electric vehicles, automated driving, and more. That might explain the $13 billion cost-cutting program it’s moving forward with, then…

Why should I care?

The bigger picture: Things are looking up.

With German carmakers like BMW struggling, it’s little wonder eurozone manufacturing activity is hovering near a seven-year low. But data released on Wednesday offers a glimmer of hope: it showed signs of life for German manufacturing, which has been the biggest contributor to the slump in the bloc’s activity. The data showed a rebound in German factory orders, with demand rising 1.3% in September – far exceeding estimates of a 0.1% gain.

Zooming out: Everyone has to leave home sometimes.

German sportswear brand Adidas also reported earnings on Wednesday, beating growth estimates for both sales and profits. The company makes more than 70% of its sales outside Europe, so it’s less exposed to the region’s weakening economy. Sales have been rising in North America, Asia Pacific, and emerging markets – and now that European sales have joined the party, growing last quarter, perhaps it’s time to start looking at the region more optimistically.

Originally Posted on November 6, 2019 – The Inadequate Driving Machine

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