By Max Bernhard 
 

BMW AG (BMW.XE) shares tumbled on Tuesday after the luxury car maker cut its 2018 guidance prompted by headwinds that have also affected its peers.

The German company said the effects of new emissions testing regulations in Europe, increased provisions, and ongoing global trade tensions would pinch revenue and earnings this year. It cut its outlook for pretax profit and its automotive-division margin.

Emissions rules and trade tensions have already led competitor Daimler AG (DAI.XE) to cut its outlook in June. Volkswagen AG (VOW.XE) has also warned that the changeover to the new emissions-testing standards would impact earnings.

At 1216 GMT, shares trade 3.9% lower at EUR80.22 after falling as much as 5.5% immediately following the warning.

BMW got its vehicles ready for new European emissions-testing rules in time but the changeover has led to increased competition that could ultimately hit sales. The car maker said it would thus reduce its volume planning "to focus on earnings quality."

The switch to the new emissions rules which came into effect this month "led to significant supply distortions in several European markets and an unexpected intense competition," BMW said.

The new standards have led to increased pricing pressure as manufacturers were offering discounts to sell their noncompliant vehicles ahead of the September deadline, London-based brokerage Evercore ISI said ahead of BMW's guidance cut.

Pricing pressure also increased due to ongoing international trade conflicts which are distorting demand more than expected, BMW said. The guidance revision is also due to higher provisions in its automotive segment, where BMW cut revenue and EBIT margin expectations.

BMW now expects "a moderate decrease" in group pretax profits on year, compared with a flat forecast previously. It now forecasts an automotive margin of at least 7%, compared with its usual 8% to 10% target for the division.

--Pietro Lombardi contributed to this article

Write to Max Bernhard at max.bernhard@dowjones.com

(END) Dow Jones Newswires

September 25, 2018 09:00 ET (13:00 GMT)