Statement of the Chairman of the Board of Management

Norbert Reithofer
Chairman of the Board of Management

Dear Shareholders,

Our vision at the BMW Group focuses on long-term thinking, successfully charting our own course and leading the way for our industry.

Four straight record years for the BMW Group.

For years, we have stood at the pinnacle of the world’s automotive premium segment. Even during the 2008 / 2009 global financial and economic crisis, we reported a profit and paid a dividend. Since then, the BMW Group has enjoyed four consecutive record years. Investors in our Company can look forward to long-term value enhancement and our shareholders can rely on us to achieve profitable growth – even in the face of high volatility and challenges in our business environment. For this reason, we continue to invest in our future, in all areas of individual mobility. For us as a premium manufacturer, innovation and entrepreneurial spirit are key towards growing and creating new trends.

2013 financial year – the success continues.

Our vehicles are more desirable than ever: we delivered more than 1.96 million BMW, MINI and Rolls-Royce cars to customers in 2013, exceeding the previous year’s record by 6.4 %. Individually, our three automobile brands also posted record sales, with more than 1.65 million BMW, over 305,000 MINI and exactly 3,630 Rolls-Royce motor cars sold. We offer customers a full spectrum of premium products – from MINI in the small car segment to Rolls-Royce in the ultra-luxury class. Our core BMW brand represents sheer driving pleasure: the BMW 3 Series, 5 Series and 6 Series models and the BMW X1 are all leaders in their respective segments. The BMW brand also comprises efficient high-performance models from BMW M and the particularly sustainable vehicles of the BMW i family, with the BMW i3 and, from 2014, the BMW i8.

BMW Motorrad, which celebrated its 90th anniversary last year, delivered more than 115,200 motorcycles to customers. In the shrinking market segment above 500 cc, BMW Motorrad defied the trend, posting significant growth and beating the previous year’s sales by 8.3 per cent. The Financial Services segment, with operations in more than 50 countries, also continues to grow and made a significant contribution to our sales and earnings in 2013.

Valuable premium brands and desirable products and services are the foundation for our business success. Group profit before tax increased by 1.4 % to around € 7.9 billion in 2013, reaching the same level as our 2012 record year, as forecast. Net profit rose by 4.5 % to more than € 5.3 billion.

These results reflect the day-to-day performance, know-how and personal commitment of our employees worldwide. All of us at the BMW Group share a passion for mobility. We identify with our Company and its products. All business areas performed well in 2013. On behalf of the Board of Management, I would like to thank all our employees for their dedication. I would also like to express our sincere gratitude to our retail organisation, suppliers and partners, who all contribute to the success of the BMW Group.

Balanced growth a key ingredient for success.

Our Company has its roots in Munich and in Germany. But, today, the BMW Group is a global company that sells its products in more than 140 countries. Our vehicles are produced at 28 locations in 13 countries. At all our locations, we take our corporate responsibility seriously.

We target balanced growth in the three main economic regions of the world. Thanks to our highly flexible production network, we are able to avoid overdependence on any one region and offset market fluctuations. The flexibility of our production network allows us to quickly adapt to changing external circumstances.

In 2013, our sales were evenly distributed between the three main economic regions of Europe, Asia and the Americas. Gains in the Americas and Asia compensated for weak markets in a number of European countries. In 2013, our two largest single markets, China and the US, accounted for around 20 and 19 %, respectively, of total Group sales, followed by our domestic market of Germany with around 13 % of sales.

When growth markets shift, it is imperative to strengthen our global presence. Since our production follows the market, we currently produce more than 45 % of our vehicles outside of Germany. At the same time, more and more countries are recognising the economic importance of a locally based automotive industry as a driving force for growth and employment. In late 2013, we laid the foundation stone of a new plant in the growth market of Brazil.

Entering into e-mobility: we deliver on our promises.

The BMW Group confirmed its position as the pacesetter for future mobility in 2013. In late July, the series model of the BMW i3 made its world debut simultaneously in New York, London, Beijing and Munich. This innovative vehicle was specially designed for electric mobility and has been well-received by the media worldwide. Customer demand is far exceeding our expectations.

With the BMW i3, we have adopted a totally new approach to automobile manufacturing, employing new and especially sustainable production processes. This is the first time an entire passenger compartment made of carbon-fibre-reinforced plastics (CFRP) has been mass-produced. E-mobility is realised throughout our competence network with locations in Leipzig, Dingolfing, Landshut, Wackersdorf and Moses Lake, USA.

The BMW i3 comes with our comprehensive 360°ELECTRIC service package to ensure that everyday electric driving is easy and convenient for customers – through recharging at home, for example.

This will be followed in 2014 by the second model from the BMW i family, the BMW i8 plug-in hybrid sports car.

Step by step towards our vision for 2020.

Our vision for the year 2020 is to be the leading provider of premium products and premium services for individual mobility.

One thing is certain: the Company is already more than just a car manufacturer. Attractive mobility services and digital connectivity also play an increasingly important role. With the realignment of its BMW ConnectedDrive services, BMW is expanding its position as the leading provider of Internet-based in-car services, focusing on driver assistance systems with comfort and safety functions, as well as infotainment and mobility services.

For more and more people worldwide, a vehicle is indispensable and desirable at the same time. That is precisely why it is so essential to adapt individual mobility to present and future demands, as well as different customer needs. To do this, we think far beyond the car simply as a means of transport.

To us, being the leading premium supplier also means being a leader in the field of sustainability. In every project, we consider environmental and social factors, as well as economic aspects, in our decision-making processes. Sustainable development is an investment in our future competitiveness. We have therefore set ourselves ambitious targets for 2020 in the relevant areas, namely products and services, production and value creation, and employees and society. Two examples: first, we aim to reduce resource consumption per vehicle produced by 45 % from 2006 levels by 2020. Second – also by 2020 – we aim to halve the CO2 emissions of our European new vehicle fleet from 1995 levels. These currently stand at 133 g / km, but our customers today can already choose between 39 models with emissions of less than 120 g CO2 / km.

In the same way that we earned a competitive edge with Efficient Dynamics, we are now, once again, investing in our future. This applies equally to new models and vehicle concepts, alternative drive technologies, new locations, mobility services and new business fields. Our research and development expenditure therefore increased to around € 4.8 billion in 2013. Our financial strength allows us the necessary room to do this. In this way, we are laying the foundations today for our future success.

People shape our future – our strength lies in diversity.

It is part of our philosophy as an attractive employer to invest continuously in developing the skills of our employees. In the past seven years alone, we have invested approximately € 1.5 billion in training. Welcoming diverse, complementary talents on board is a further priority for us – because mirroring the diversity of our customers within the Company is another way of optimising customer care. The actions we take together are rooted in our tradition and our culture of cohesion. That is what makes the BMW Group so strong and unique.

Being a leader in the premium segment is about more than just good business results. As a global company in a changing world, it is both a challenge and a source of motivation for us to strive for long-term success and profitability, to strike out independently in new directions and still remain true to our values and reliable in our actions. We have worked hard to become the leading premium manufacturer – and we will continue to be a pioneer. We must therefore strive to be bolder, more innovative and simply better than our competitors.

We will build on our successful business performance in 2014, once again targeting record sales and Group earnings. The EBIT margin in the Automotive Segment should remain between 8 and 10 %. The main risks and uncertainties we face stem from an ever-increasing competitive environment. We continue to face challenges in some specific markets within Europe. 2014 will be another year of ground-breaking innovations for us, as we add a large number of new models to our portfolio. In early March, we unveiled the BMW 2 Series Active Tourer: this all-new vehicle concept will be the first BMW model with front-wheel drive.

In 2016, the Company will celebrate its centenary. We view this milestone not only as an opportunity to reflect on our heritage but also to be a springboard towards 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, 2014