Statement of the Chairman of the Board of Management

Norbert Reithofer
Chairman of the Board of Management

Dear Shareholders,

The 2011 financial year was the best ever in the history of your Company, the BMW Group. We achieved new sales volume, revenues and earnings highs, and exceeded our targets.

The BMW Group remains the world’s top-selling premium car manufacturer

With almost 1.67 million vehicles sold, the BMW Group continues to be the world’s leading premium manufacturer in terms of sales volume. Our three automobile brands, BMW, MINI and Rolls-Royce, also set new individual records. A further 113,000 customers purchased a BMW or Husqvarna motorcycle. Our Financial Services business also contributed to this positive sales development.

Revenues of € 68.8 billion and a profit before tax of more than € 7.3 billion also represent new highs for the Group. The BMW Group stands on a firm financial footing, maintaining our profitability. This provides us with additional flexibility in an uncertain environment and also gives us the ability to continue making important investments in the future.

Our capital expenditure of around € 3.7 billion in 2011 included investments in new products and the expansion of our international production network. One thing is clear: we will continue to make major investments over the next few years. That is the only way to respond to growing demand for our vehicles and at the same time realise new drive technologies, industrialise electromobility and offer our customers innovative mobility services. Our research and development expenses increased to more than € 3.3 billion in 2011. This investment was primarily earmarked towards projects to secure our future growth.

We continue to strive for a good balance of growth between Europe, the Americas and Asia. We believe this is essential to economic success in a highly volatile environment. The same applies to our highly flexible international production network of 25 sites in 14 countries. In 2012, we will open a new plant in Tiexi, China. Future growth also exists in the BRIKT countries of Brazil, Russia, India, South Korea and Turkey. We intend to capitalise on this potential.

We are expanding our international presence in a global world. This will give us greater freedom from market and currency fluctuations, promoting our long-term success and enhancing our competitiveness. Not least, it will secure jobs in Germany and around the world. Germany continues to form the backbone of our production activities.

Consistent implementation of Strategy Number ONE is paying off

At the BMW Group, our ideas and actions are geared towards the long term. This is part of our corporate culture. Back in autumn 2007, before the global financial and economic crisis, we adopted our Strategy Number ONE with its four pillars: “Growth”, “Shaping the future”, “Profitability” and “Access to technology and customers”. This strategy lays out the guidelines for our Company to remain focused on profitability and long-term value creation in a changing environment and to achieve significant efficiency improvements. We set ourselves concrete profitability targets for 2012 and formulated our vision for 2020.

All of this has paid off – as our success in 2011 has shown. We deliver on our promises. As shareholders and investors, you support us in our long-term approach. I would like to thank you for your ongoing confidence in the Company and the decisions we make. 2011 confirmed that BMW shares are an attractive long-term investment – as you have come to expect from a premium company.

Our success in 2012 and beyond

A clear focus on premium vehicles and premium services for individual mobility remains the core of our business model. We will continue to refine this approach. We do so in light of changing customer demands, stringent regulations and the demands placed on automobile manufacturers by different industrial policies in different countries. We reviewed our strategy in 2011 for this reason. All of our assumptions were verified against current trends and developments.

Our aim for the 2012 financial year is to build on past year’s success. We are targeting new highs in sales volume and pre-tax Group earnings. We intend to continue operating at a high level of profitability over the long term, which means maintaining an EBIT margin of between eight and ten per cent in the Automotive segment – assuming that there are no lasting negative economic conditions.

We benefit from an excellent starting position: we have a young and attractive product line-up. Regarding the BMW brand, the new BMW 3 Series will be playing a major role in 2012. The new BMW 3 Series Sedan has been available since mid-February. This was the first time we launched one of our models in all markets simultaneously. As well as incorporating a large number of technical innovations, our three lines, “Sport”, “Modern” and “Luxury”, will give customers even more choices for individualisation. We will also be adding the BMW brand’s new CO2 champion to our product range: the 163-horsepower BMW 320d EfficientDynamics Edition has a fuel consumption of 4.1 litres per 100 kilometres in the EU test cycle. This is equivalent to CO2 emissions of 109 grams per kilometre. The BMW 320d will be followed in the autumn by the BMW ActiveHybrid 3, the world’s first fully hybrid compact sports sedan in the premium segment.

Another BMW product highlight this year will be the BMW 6 Series Gran Coupé. This vehicle, the first four-door coupé in the history of the BMW brand, will come onto the market in June. The revised BMW 7 Series will follow in July, bringing true luxury to the premium segment. The MINI family will expand to six members in 2012 with the addition of the MINI Roadster. Rolls-Royce will maintain its successful course as the pinnacle of luxury motoring with its Phantom model series and the Rolls-Royce Ghost.

Shaping the mobility of tomorrow as a pioneer and trendsetter

We will begin series production of electric vehicles in late 2013 and intensive preparations are already underway. Electric propulsion is an option for all three of our brands. The first two concept cars from the new BMW i family attracted considerable attention. Our BMW i3 and BMW i8 prove that sustainable mobility and sheer driving pleasure go exceptionally well together. At the same time, we are exploring totally new approaches to ensure environmentally and resourcefriendly production of BMW i models. The power for the assembly of BMW i models will be obtained solely from renewable sources – a first for the industry.

Resource-efficient production and sustainability are part of our premium promise. Measures to this effect are implemented at all our locations worldwide. As a result, the BMW Group has been rated the industry leader in all major sustainability rankings for many years.

Strategic alliances as part of Strategy Number ONE

The mobility of the future will take many forms. Accordingly, strategic collaborations with the best partners are an integral part of Strategy Number ONE. This secures long-term access to technologies and customers, pools expertise and achieves positive cost effects through economies of scale. In our opinion, there are two key elements for good collaborations: first, the partnership must create a win-win situation. Second, the premium character and independence of our vehicles and brands must always be assured.

In 2011 we opened a new production plant for carbon fibres in Moses Lake in the United States together with the SGL Group. It forms part of our international manufacturing network of ultra-light carbon-fibre reinforced plastic (CFRP) for the BMW i family. Our years of experience using CFRP parts in automobile construction give us a distinct advantage. Furthermore, we are positioning the BMW Group as a clear innovation leader in the field of lightweight construction.

We also strengthened our international multi-brand fleet management business with the acquisition of the ING Car Lease Group. As a result, the BMW Group now ranks among Europe’s top five fleet service providers. With the expansion of our fleet management business, we are also laying an excellent foundation for developing modern mobility solutions and mobility services.

Our joint venture with PSA Peugeot Citroën was also successfully launched in 2011 as BMW Peugeot Citroën Electrification. The joint development of components for electrification and hybridisation will also make the European automobile industry more competitive in the field of hybridisation.

A major breakthrough in electromobility will depend on further progress in lithium-ion battery technology. Our planned cooperation with Toyota Motor Corporation will contribute to this through joint research into battery cell technology.

The right approach to the challenges of our times

Business success depends on many different parameters. We believe that social responsibility and sustainable action are just as significant in this respect as growth, profitability and efficiency.

The Company’s success is only made possible through the dedication, creativity and team spirit of the almost 100,000 employees of the BMW Group. On behalf of the Board of Management, I would like to thank all of our employees around the world for their commitment in 2011. I would also like to thank our entire retail organisation, our suppliers and business partners.

The BMW Group is considered to be one of the most attractive employers. We recruited a total of 4,000 new staff in 2011, securing ourselves key competences for the future. We also embrace our responsibility for training young people. We increased the number of apprentices to 3,899 by the end of 2011.

We are shaping the mobility of today and tomorrow for our customers, and thereby building a stable foundation for the future of the BMW Group.

As our shareholders, you have continued to show your support and confidence in our abilities to manage the BMW Group. We strive to ensure that your Company remains an attractive investment and a profitable enterprise with a strong reputation and high level of credibility for years to come.

Norbert Reithofer
Chairman of the Board of Management

Updated March 13, 2012