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BMW AG: 2005 company profile edition 1

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BMW AG: 2005 company profile edition 1

April 2005

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Table of contents

Single-user licence edition.......................................................................................... ii Copyright statement ..................................................................................................ii Table of contents ........................................................................................................ iii List of tables ................................................................................................................ iv List of figures ............................................................................................................... v just-auto.coms research portfolio ............................................................................ vi Incredible ROI for your budget single and multi-user licences ..............................vi just-auto.com membership ....................................................................................... vii Chapter 1: Company Dossier...................................................................................... 1 Chapter 2: Worldwide Locations ................................................................................ 4 Chapter 3: Financial Analysis ..................................................................................... 5 Chapter 4: Competitor Analysis ................................................................................ 6 Chapter 5: Key Events ............................................................................................... 7 Chapter 6: SWOT Analysis.......................................................................................... 9 Strengths.................................................................................................................. 9 Weakness ................................................................................................................ 9 Opportunities.......................................................................................................... 10 Threats ................................................................................................................... 10 Chapter 7: Customers.............................................................................................. 11 Chapter 8: Products................................................................................................... 13 Chapter 9: Product Development ............................................................................. 15 Chapter 10: Prospects ............................................................................................... 17 Online sources of information .................................................................................. 19 Free email newsletters ........................................................................................... 19 Other research reports ........................................................................................... 19 Global news and feature articles............................................................................ 19 Search the web ...................................................................................................... 19 Your feedback ............................................................................................................ 20

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List of tables

Table 1: BMWs key automobile production plants worldwide ................................. 4

Table 2: BMWs key financial performance, 2000-2004........................................... 5

Table 3: BMW key products across its automobile brands .................................... 13

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List of figures

Figure 1: Key automobile markets for BMW Group, 2003-2004 (as % of sales).... 12

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Chapter 1 Company Dossier

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Chapter 1: Company Dossier


Company name

Bayerische Motoren Werke Aktiengesellschaft (BMW)

Business activity BMW Group, headquartered in Munich, Germany, is one of the most successful multibrand premium automobile manufacturers in the world. The company manufactures, distributes and sells passenger cars (including Sedans, Coupes, and Convertibles etc) and motorcycles. BMW operates three business segments namely: Automobiles, Motorcycles and Financial Services. In the fiscal ended December 31, 2004, the BMW group posted sales of 44,335 million, an increase of 6.8% over the previous fiscal. Stock symbol

BMWs common stock is traded on the DAX Index and the Prime Automobile Performance Index. The International Securities Identification Number (ISIN) of the companys common stock is DE0005190003. The German Securities Code Number of BMW common stock is 519 000.

Key executives

Dr. Helmut Panke, Chairman of the Board of Management of BMW AG Ernst Baumann, Human Resources, Industrial Relations Director Dr. Michael Ganal, Sales and Marketing Prof. Dr. Ing. Burkhard Gschel, Development Stefan Krause, Finance Dr. - Ing. Norbert Reithofer, Production

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Chapter 1 Company Dossier

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Summary Financials

In millions Group Sales Automobile Segment sales Net profit (loss) Total assets

2002 XX,XXX XX,XXX X,XXX XX,XXX

2003 2004 XX,XXX XX,XXX XX,XXX XX,XXX X,XXX X,XXX XX,XXX XX,XXX Source: BMW

Key Competitors

BMWs arch-rival in the premium car segment in USA and Europe is DaimlerChryslers Mercedes Car Group. Other main competitors of BMW in Western Europe include Volkswagen (Audi, VW, Bentley), Fiat (Lancia, Ferrari, Alfa Romeo, Maserati), Ford (Jaguar, Land Rover, Aston Martin, Volvo), General Motors (Opel, Saab, Vauxhall), Porsche, Renault, Toyota (Lexus), PSA (Peugeot/Citroen) etc. In USA, the companys major competitors include Ford (mainly the Lincoln luxury brand), Nissan (Infiniti), Honda (Acura), Toyota (Lexus), Porsche, Volkswagen (Audi, VW, Bentley), and some of the models manufactured by General Motors (Saab, Cadillac). The principal competitors of BMWs ultra premium Rolls-Royce brand are DaimlerChryslers Maybach brand and Bentley sedans.

Outlook

Despite the challenging economic conditions, BMW reported 2004 as the most successful year in its history due to record sales volume and earnings. The Automobiles segment reported a profit of X,XXX million from ordinary activities, an impressive increase of XX.X% over 2003. BMW predicts that the premium car segments will experience stronger growth than the volume segment over the coming years. In this backdrop, BMW is looking at further expanding its presence in both traditional and new markets. BMW expects earnings in 2005 to match those of 2004 as the high steel prices and the weak dollar will offset increase in sales volume. However, BMW is confident of a sales volume increase in 2005 across all its brands. On the production front, BMW is all set to vamp up its manufacturing capabilities to aid production of new models over the

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Chapter 1 Company Dossier

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coming years. However, the continuing fall of the dollar and the increase in price of raw materials are two pressing factors that threaten to temper the companys earnings in the foreseeable future.

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Chapter 2 Worldwide Locations

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Chapter 2: Worldwide Locations


Headquartered in Munich, Germany, the BMW Group has XX production and assembly plants across the world. The company also has XX sales subsidiaries and a research and development (R&D) network. The BMW Group employed XXX,XXX people as of December 31, 2004. The following table illustrates some key BMW Group production plants across the world.

Table 1: BMWs key automobile production plants worldwide Country Germany Plant Berlin plant Dingolfing plant Landshut plant Munich plant Hams Hall plant Oxford plant Swindon plant Spartanburg plant BMW Brilliance Automotive Ltd, Shenyang (joint venture with Brilliance China Automotive Holdings) TRITEC Motors Ltda, Curitiba (joint venture with DaimlerChrysler) Source: BMW

UK

USA China Brazil

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Chapter 3 Financial Analysis

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Chapter 3: Financial Analysis


In the fiscal year 2004, the BMW group posted revenues of XX,XXX million, an increase of X.X% over the previous fiscal. The Automobiles segment contributed XX,XXX million (or approximately XX%) of total Group sales. The sales of the Automobiles Segment rose by XX% over fiscal 2003. The rise in sales of the Automobiles Segment was primarily due to the increase in number of cars sold in 2004. BMW sold X,XXX,XXX cars in 2004, an increase of X.X% over 2003. Automobiles Segments profit before taxes for 2004 amounted to X,XXX million, an increase of XX.X% over 2003.

Table 2: BMWs key financial performance, 2000-2004 (in millions, except employee figures) Group Sales Automobiles Segment sales Profit from ordinary activities Net profit (loss) Capital Expenditure Total Assets Number of Employees 2000 XX,XXX XX,XXX X,XXX X,XXX X,XXX XX,XXX XX,XXX 2001 XX,XXX XX,XXX X,XXX X,XXX X,XXX XX,XXX XX,XXX 2002 XX,XXX XX,XXX X,XXX X,XXX X,XXX XX,XXX XX,XXX 2003 2004 XX,XXX XX,XXX XX,XXX XX,XXX X,XXX X,XXX X,XXX X,XXX X,XXX X,XXX XX,XXX XX,XXX XX,XXX XX,XXX Source: BMW

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Chapter 4 Competitor Analysis

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Chapter 4: Competitor Analysis


BMW is a supplier of premium cars and primarily serves customers in the high price and high quality segment. The companys arch-rival in the premium car segment in USA and Europe is DaimlerChryslers Mercedes Car Group. Other main competitors to BMW in Western Europe include Volkswagen (Audi, VW, Bentley), Fiat (Lancia, Ferrari, Alfa Romeo, Maserati), Ford (Jaguar, Land Rover, Aston Martin, Volvo), General Motors (Opel, Saab, Vauxhall), Porsche, Renault, Toyota (Lexus), PSA (Peugeot/Citroen), etc. In the USA, the companys major competitors include Ford (mainly the Lincoln luxury brand), Nissan (Infiniti), Honda (Acura), Toyota (Lexus), Porsche, Volkswagen (Audi, VW, Bentley), and some of the models manufactured by General Motors (Saab, Cadillac). The principal competitors of BMWs ultra premium Rolls-Royce brand are DaimlerChryslers Maybach brand and Bentley sedans.

In USA, which is the largest market for luxury cars, the BMW brand saw its market share increase to X.X% in 2004, from X.X% in 2003. During the same period Mercedes-Benz's market share remained the same X.X%. In Western Europe, the market share of BMW increased from X.X% in 2003 to X% in 2004, while Mercedes-Benz's share fell from X.X% to X.X%. Moreover, BMW is waging a pitched battle against Toyota's Lexus division for overall sales leadership in traditional luxury brands in the USA. The Rolls-Royce Phantom is still the market leader in the luxury car segment. The key international competitors for BMW in the buoyant Chinese market include DaimlerChrysler, Volkswagen and Ford.

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Chapter 5 Key Events

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Chapter 5: Key Events


The history of BMW can be traced to the establishment of Rapp-Motorenwerke by Karl Rapp in Munich (Germany) in 1913. The company initially produced aircraft engines. The modern day Bayerische Motoren Werke (BMW) officially came into existence in 1917, when Max Friz and Franz-Josef Popp took over Karl Rapps business. The following year the company went public. The first factory of BMW was constructed in Neulerchenfeldstrasse, Germany. In 1928, BMW purchased the Eisenach/Thuringia car factory along with the license to construct a small car named Dixi. In 1940, the company commissioned a streamlined body for the famed sports car of the period, Mille Miglia. BMW entered the small car segment with the Isetta in 1956. The company released its first sporty family sedan, the new 1500 in 1961. In 1966, BMW purchased the ailing Glas Company and converted Dingofling into its biggest plant over the following years.

BMWs first 5 Series car was launched in 1972. During the same year BMW Motorsport GmbH was founded. Almost a decade later, BMW became the first European company to set up a subsidiary in Japan. In 1986, the company unveiled the BMW 745i, which was the first European car to be equipped with an internal fuel preparation and liquid hydrogen tank. The 8501 Coup was launched in 1989. Also during the year, BMW acquired the process engineering specialist, Kontron GmbH.

More than a decade later, in 2001, BMW took several steps to expand its capacity. Production of the BMW X5 was increased by over XX% at the companys Spartanburg plant in the USA. Also, production commenced at the companys Hams Hall plant in Great Britain. BMW decided to construct a new plant in the Leipzig/Halle region, with an investment of X.X billion. In 2002, to derive full advantage of the market potential in Poland at the time, BMW set up its own sales company there. In the latter half of 2002, BMW initiated restructuring of its European sales network following the Block Exemption Regulation (BER) passed by the European Union (EU) commission.

In 2003, the BMW Group Partner portal went online. This portal helps to integrate suppliers and development partners into the work processes of the Group. It was part of BMWs strategy to involve its business partners in the form of a supplier web.

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Chapter 5 Key Events

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A very significant event in 2003 was that the BMW Group added the Rolls-Royce brand to its portfolio. Also during the year, BMW took over direct market responsibility in Ireland, Greece, Luxembourg, and Denmark, as part of its strategy to expand its international market presence. The strategy came into effect from October 1, 2003, around the same time as the EUs BER came into force. Towards the end of 2003, BMW announced that the company was appointing individual brand managers for each of its BMW, Mini, and Rolls-Royce brands. The move was part of the companys attempt to strengthen the Group brands after successfully adding Mini and Rolls-Royce to its brand portfolio during the preceding three years. The appointments came into effect on January 1, 2004.

In April, 2004, BMW commenced the production of the BMW X5 4.8is at its Spartanburg plant in the USA. In May 2004, BMWs new plant in Shenyang (China), a joint venture with Brilliance Automotive Holdings, was officially inaugurated. BMW opened a Sales and After-Sales Training Academy in Unterschleiheim, Germany. This facility has the capacity to train over 10,000 individuals annually. With its BMW 1 Series launched in September 2004, BMW entered the compact class segment. For the first time the company offered a convertible equipped with a diesel engine when it launched its new BMW 320Cd Convertible

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Chapter 6 SWOT Analysis

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Chapter 6: SWOT Analysis


Strengths

Worldwide, the BMW Group is one of the most successful multi-brand premium car manufacturer in the automobile industry. The Rolls-Royce phantom holds the number one position in the super-luxury car segment. Moreover, BMW is the only automobile manufacturer possessing three non-overlapping premium car brands in its portfolio.

The BMW group on an average spends around X% of its revenues on R&D, which is one of the highest in the industry. The keen focus on R&D is evidenced by the number of new models the Group has released over the past few years. Thanks to its R&D efforts, BMW has also developed an innovative array of engines such as the Hydrogen H2R (1 and 2) Hydrogen Combustion Engine, the Straight-six petrol engine 3 etc.

Weakness

BMWs heavy cost German base might affect the profitability of the company in the long run as more and more competitors shift product development activities to lower cost countries. BMW might be forced to negotiate a way to maintain cost competitiveness and its reputation for German engineering excellence.

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Chapter 6 SWOT Analysis

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Opportunities

The expansion of the European Union (EU) to XX countries from XX countries in May 2004, has converted the EU into the worlds biggest trading bloc with a combined population of around million. This offers ample opportunities for BMW to leverage its strong

European position in the premium car segment to garner more market share across new and expanding markets. BMWs concerted forays into the Chinese luxury car market portends to an increase in the earnings of the company over the coming years. China already ranks as the thirdlargest market for BMWs 7 Series luxury limousines. BMW predicts that robust growth will place China among the companys seven largest markets in a few more years. This is a significant improvement over the 12th position held by the Chinese market for BMW in 2002.

Threats

The continuing decline of the dollar against the euro threatens to undercut BMWs topline thereby tempering its profitability. The rising price of raw materials such as steel threatens to offset the companys earnings.

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Chapter 7 Customers

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Chapter 7: Customers
Overall, the BMW group sold X,XXX,XXX cars spanning all its brands in 2004, an increase of X.X% over 2003. The USA remained the largest market with BMW selling a total of XXX,XXX cars in that country. This represented an increase of X% over the sales volume achieved in 2003. It is notable that no European manufacturer of premium cars sold more cars in the US market in 2004 than BMW. In Western Europe, sales increased by XX,X% in 2004 to XXX,XXX units. Germany alone registered sales of XXX,XXX units, an increase of XX.X% over 2003. Over the last five years, BMW has more than doubled its sales in the UK. In 2004, XXX,XXX units were sold in the UK, an increase of X% over 2003. The total number of cars sold in Asia in 2004 was XX,XXX units, an increase of X.X%. Over half of this quantity was sold in Japan, where XX,XXX units were sold. Japan registered an increase in sales of X.X% in 2004, over 2003.

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Chapter 7 Customers Figure 1: Key automobile markets for BMW Group, 2003-2004 (as % of sales)

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2003
Other XX.X% USA XX.X%

France X.X% Japan X.X% Italy X.X% United Kingdom XX.X% Germany XX.X%

2004
Other XX.X% USA XX.X%

France X.X% Japan X.X% Italy X.X% United Kingdom XX.X%

Germany XX.X%

Market USA Germany United Kingdom Italy Japan France Other

2003 XX.X XX.X XX.X XX.X XX.X XX.X XX.X

2004 XX.X XX.X XX.X XX.X XX.X XX.X XX.X Source: BMW

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Chapter 8 Products

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Chapter 8: Products
The BMW Group is one of the most successful multi-brand premium car manufacturers in the automobile industry. The BMW and Rolls-Royce brands of the company serve the premium and ultra premium segments of the automobile market. The BMW brand includes Sedans, Coupes, Tourings, Compacts, etc. The company sells small cars through its Mini premium brand.

The following table illustrates key vehicle ranges under each of the Groups automobile brands.

Table 3: BMW key products across its automobile brands BMW Brand BMW 1 Series BMW 3 Series models Sedan Convertible Coup Compact Touring BMW 5 Series 525i Sedan 530i Sedan 545i Sedan BMW 6 Series models Coup Convertible BMW Individual 6 Series Convertible BMW Individual 6 Series Coup BMW 7 Series models Sedan Security vehicle BMW X3 Series (X3) BMW X5 models X5 Security vehicle BMW Z4 (Z4) BMW M models M3 Coup M3 Convertible Mini Brand MINI One MINI One D Rolls-Royce Brand Rolls-Royce Phantom Rolls-Royce 100EX (Centenary Experimental Car)

MINI Cooper

Rolls-Royce Phantom (Centenary model), limited edition

MINI Cooper S

MINI One Cabrio

MINI Cooper Cabrio MINI Cooper S Cabrio

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Chapter 8 Products M5 M5 Individual M6

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Source: BMW

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Chapter 9 Product Development

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Chapter 9: Product Development


In 2004, BMW incurred R&D costs of XX,XXX million, an increase of XX.X% over 2003. Preparations for new models and engines were the key focus of R&D at BMW Group in 2004. Recent technological development initiatives of BMW include the following: Hydrogen H2R (1 and 2) Hydrogen Combustion Engine: BMW is the worlds first car manufacturer to prepare medium and long term development of its vehicles in alignment with a hydrogen-based operation. The major aim of this concept called BMW CleanEnergy is to eradicate emissions and to utilise regenerative sources of energy. The H2R is based on the petrol engine of BMW 760i and features advanced technologies such as fully variable Valvetronic valve drive.

V10 engine 2: The V10 is claimed to be the most powerful BMW engine till date. It has a maximum engine speed of 8,250 rpm. The engine helps in lower fuel consumption and increased power output.

Variable Twin Turbo Diesel 1: The Variable Twin Turbo Technology comes armed withy multi-stage charging and is touted to be one of the most powerful diesel engine in its class. The engine comes with two varied sized and successively activated turbo-chargers. The engine was fitted to the BMW 535d Sedan and the 535d Touring.

Straight-six petrol engine 3: The three-litre, straight-six power unit is the worlds lightest six-cylinder engine. Continuously variable valve control or the VALVETRONIC ensures fuel economy and powerful torque at low engine speeds also.

Seven-speed SMG transmission: The Seven-speed SMG transmission provides eleven gearshift options ranging from comfortable cruising with automatic gear selection to rapid gearshifts for sporty driving. The system also

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Chapter 9 Product Development

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features Launch Control, a maximum acceleration programme inspired by Formula 1.

Second-generation ActiveSteering: This new system alters the steering ration vis--vis driving situation requirements. The system also automatically stabilises the vehicle resulting in more safety and comfort.

xDrive all-wheel-drive system 1: The xDrive system acts before the wheels start to lose their grip unlike conventional all-wheel drive systems that require at least one of the wheels to be spinning. In the new system, an electronically controlled multi-plate clutch transfers power between the front and rear axles, thus facilitating optimum traction and sporty driving.

MINI Convertible soft top system 2: The MINI Convertible allows the front section of the soft top to open and close at the touch of a button.

During 2004, BMW introduced a number of vehicle models that include the BMW 1 Series, the BMW X3 Sports Activity Vehicle, the BMW 6 Series Convertible, the MINI Convertible etc. The BMW 1 Series marked BMWs successful entry into the compact vehicle category. BMWs new BMW M5, was presented in the autumn of 2004 and is slated to hit the market in April 2005. Various models have been lined up to hit the market during the first half of 2005. The line up includes the new BMW 3 Series, the new BMW M6, and the revised BMW 7 Series. The MINI brand was also augmented with the MINI Convertible, which is now available in three engine options.

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Chapter 10 Prospects

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Chapter 10: Prospects


In 2004, for the first time in the history of BMW, its brand exceeded the sales threshold of one million by registering sales of X,XXX,XXX cars during the year. A number of new models were released in 2004 including the BMW 5 Series Touring in Europe, the BMW 6 Series Coup, the Convertible models, the BMW X3, etc. Through the introduction of new models, the Group has gained access to new customer groups. Despite challenging economic conditions, BMW reported 2004 as the most successful in its history due to record sales volume and earnings. The Automobiles segment reported a profit of X,XXX million from ordinary activities, an impressive increase of XX.X% over 2003.

Across the world, the economic momentum which characterised the first half of 2004 slowed down visibly as the year progressed. Global growth is expected to be burdened by high raw material and oil prices coupled with more restraining economic policies. The economies of USA, Japan and other emerging economies such as Latin America and Asia are expected to post moderate economic growth rates. While the Euro region is likely to recover at a moderate pace, the German economy is expected to decline marginally. With respect to the auto industry, while some growth is expected in the traditional markets of Europe and Japan, growth is expected to be flat in the largest luxury car market of USA. However, the major emerging markets of Asia and Latin America are expected to witness a robust growth in terms of total number of vehicles sold.

BMW predicts that the premium car segment will experience stronger growth than the volume segment over the coming years. In this backdrop, BMW is looking to further expand its presence in both traditional and new markets. BMW also expects earnings in 2005 to match those of 2004 as the high steel prices and the weak dollar offset increase in sales volume. However, BMW is confident of an increase in sales volume in 2005 across all its brands. A number of new models were set to be launched in 2005 such as the refined BMW 3 series, the 2005 BMW Z4, the 2005 BMW 7 series etc. The high number of models set to be launched during the year is expected to boost the companys topline.

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Chapter 10 Prospects

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On the production front, BMW is all set to vamp up its manufacturing capabilities to aid production of new models over the coming years. Overall, the company is set to invest over XXX million in production facilities in Oxford, UK by 20XX. Further, the company has decided to invest XXX million in its Steyr engine facility over the coming years. Other important areas of capital expenditure also include the BMW plant coming up in Leipzing, Germany and modifications carried out at the Spartanburg (USA) plant. However, the continuing fall of the dollar and the increase in price of raw materials are two pressing factors that threaten to temper the companys earnings in the foreseeable future.

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