BMW Shares Fall After China Profit Warning

BMW’s stock continues to come under pressure after the company issued its third profit warning in as many years, highlighting mounting challenges in China that are forcing the German automaker to lower earnings expectations and expand cost-cutting efforts.

The luxury carmaker announced on June 16 that it now expects profit margins for 2026 to range between 1% and 3%, significantly below its previous forecast of 4% to 6%. BMW also revealed plans to intensify its cost-reduction program, a move expected to result in additional restructuring expenses during the second half of 2026. The warning comes shortly after Milan Nedeljkovic took over as the company’s chief executive in May.

China remains at the center of BMW’s difficulties. Once a major source of profitability for the company, the market has become increasingly competitive as domestic manufacturers rapidly expand their presence, particularly in electric vehicles. Brands including BYD’s Denza and Yangwang, NIO, Geely’s Zeekr and Xiaomi, as well as Xpeng, are not only challenging foreign automakers in the EV segment but are also targeting the premium vehicle market where BMW has traditionally been strong.

The warning has reverberated across the German automotive sector, weighing on the shares of rivals including Mercedes-Benz and Volkswagen, along with its premium subsidiaries Audi and Porsche. BMW had long been viewed by investors as one of the manufacturers best positioned to withstand growing competition from Chinese brands, making the latest downgrade particularly unsettling for the market.

Reuters Breakingviews described the scale of the warning as unexpected. Columnist Pierre Briancon noted that accelerated cost-cutting measures are now unavoidable and warned that additional restructuring charges could further pressure earnings before any potential recovery materializes.

Analysts at Jefferies suggested BMW may need to consider more substantial strategic changes, including a possible restructuring of its German manufacturing operations. The firm said investors had anticipated weakness in China but were surprised by the magnitude of the profit-margin reduction. Jefferies added that BMW could be reassessing a business model that remains heavily reliant on exporting internal combustion engine powertrain technology from Germany. The investment bank currently rates BMW as a “hold.”

Berenberg Bank echoed concerns that the severity of the situation could prompt a broader strategic overhaul under the company’s new leadership. The bank expects key decisions regarding manufacturing footprints, product strategies and capital allocation to be addressed during BMW’s Capital Markets Day in September, where Nedeljkovic is expected to present a new long-term plan. Berenberg believes the company may place greater emphasis on restructuring its European and U.S. operations and adjusting its asset base in China amid changing market conditions and tariff pressures. The firm also maintains a “hold” rating.

Despite the near-term challenges, analysts point to BMW’s Neue Klasse program as a significant long-term opportunity. Bernstein described the current situation as an unusual setback for the company but highlighted the rapid rollout of Neue Klasse vehicles as a major positive. The investment firm estimates that models built on Neue Klasse technology will account for approximately 91% of BMW’s production in 2027, compared with just 9% in 2026. These vehicles are expected to generate meaningful cost savings and improve profitability over time. Bernstein continues to rate BMW as “outperform.”

The multi-billion-euro Neue Klasse initiative represents BMW’s comprehensive transformation toward electrification and digital technology. The platform will underpin more than 40 future models, beginning with the electric iX3 SUV and i3 sedan.

UBS estimated that the profit warning effectively removes around €2 billion ($2.3 billion) from BMW’s earnings outlook and places the company’s medium-term margin target of 8% to 10% further out of reach. While the recent share price decline may appear attractive to some investors, UBS cautioned that it is too early to view the weakness as a buying opportunity. The bank said investors are likely to seek greater clarity regarding BMW’s long-term objectives and shareholder returns before confidence can be restored. UBS currently maintains a “neutral” rating on the stock.

BMW shares closed at €59.62 on Thursday, down 4% for the day and 13% lower since the company issued its latest profit warning.