BMW 2005 Annual Report Download - page 61

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The economic environment in 2006
The BMW Group predicts that the global economic
upswing will continue in 2006 at similar growth
rates to those seen in 2005. As a consequence of
oil production and processing capacity shortages,
it is to be expected that prices will remain high in the
near future; it is unlikely, however that the increase
will be permanent. So far, the world economy has
performed relatively robustly in the face of high oil
prices. However, another sharp increase in prices
could have an adverse impact on the pace of global
growth, in particular in the light of the fact that the
benefits from monetary and politically-driven fiscal
measures are tailing off in most countries.
The growth rate in the United States will, at
the most, only fall marginally, despite the reduced
impetus of US economic policies. Overall, the up-
turn will remain intact, so that the USA is likely to
see continued robust growth. This also applies to
the emerging markets in Asia, Latin America and
Eastern Europe. It is expected that the growth rates
in these markets will be at a similar high level to
2006. In Japan, too, economic recovery will con-
tinue with further strong growth rates.
The pace of growth in the euro region will pick
up slightly in 2006, but will still remain slower than in
the rest of world. A possible revival depends largely
on the extent to which domestic demand can re-
cover from the weak phase that it has been going
through for some years.
Economic outlook for the automobile industry
in 2006
The most dynamic momentum for the global auto-
mobile economy will be provided again in 2006 by
the markets of Asia’s emerging economies. China
and India will be able to maintain their high growth
rates. The BMW Group also predicts high growth
rates again for the car markets in Latin America.
By contrast, the automobile sector in the three main
traditional markets (Japan, the USA and Western
Europe) is likely to continue to be static in 2006. In
Germany, it is likely that the planned value added tax
increase in 2007 will encourage consumers to buy
earlier, so that it is to be expected that car sales vol-
umes will grow slightly.
Inconsistent development of motorcycle
markets to continue
The BMW Group forecasts that international motor-
cycle markets will continue to develop extremely
divergently. It is predicted that Germany, the largest
market for BMW motorcycles, will see volumes
stabilise in 2006 after a number of years of market
contraction.
Interest rates likely to rise
The expected tightening of monetary policies by
the main central banks will result in further increases
in interest rates in 2006 and, consequently in higher
refinancing costs for the financial services business.
At the same time, the BMW Group believes that
financial services will generally continue to play a
very significant role in the volume of vehicles sold,
particularly in the area of leasing.
Outlook for the BMW Group in 2006
In the light of the general economic environment
discussed above, the BMW Group believes that it
will continue to perform successfully in the 2006
financial year. By expanding its product range even
further and systematically engaging in new markets
and segments, new opportunities will be created
to generate continued profitable growth.
Further sales volume growth is forecast for the
Automobiles segment, albeit at a more moderate
rate than in 2005 due to the previous year’s high
base, and as a result of model life-cycle factors. It
is also to be expected that the impact of seasonal
factors on sales volume will gain in significance.
Base volume factors in the first half of the year and
model life-cycle factors will mean that, compared
Outlook
Group Management Report 8
A Review of the Financial Year 8
The General Economic Environment 11
Review of operations 15
BMW Stock in 2005 38
Financial Analysis 41
--Internal Management System 41
--Earnings performance 42
--Financial position 45
--Net assets position 46
--Subsequent events report 49
--Value added statement 49
--Key performance figures 51
--Comments on BMW AG 52
Risk Management 56
Outlook 60