Shares in premium German automaker BMW fell around 7 per cent after it issued a profit warning late on Tuesday that some analysts said could herald a broader strategic rethink, including capacity cuts in Europe. BMW blamed protracted weakness in China, the world’s biggest car market, and the impact of the Iran war on prices and customer sentiment. Analysts at Deutsche Bank and Jefferies both said the outlook cut was significantly larger than expected. Wednesday’s price fall took BMW shares to their lowest level since November 2020 and weighed on shares across the European auto sector, including German rivals Volkswagen and Mercedes-Benz.
In addition to lowering its operating auto margin to 1 per cent to 3 per cent, from 4 per cent to 6 per cent previously, BMW said it would intensify cost-cutting, with a negative one-off in the second half of 2026.
BMW delivered its profit warning, which JP Morgan analysts described as radical, only six weeks after the company confirmed its outlook during first-quarter results.
It is a bad start for CEO Milan Nedeljkovic, who took over from longtime leader Oliver Zipse last month.
“After three profit warnings in the last two years, all largely China-related, BMW’s nimbus of the ‘steady Eddy’ in Autos clearly took a hit,” Deutsche Bank analysts wrote in a note.
Brokerage Jefferies said it expected the overhaul would largely hit BMW’s German operations and may accelerate localisation in markets including China and North America to protect margins and avoid exports from Germany.
This could result in the announcement of a 10-15 per cent capacity cut at the company’s capital markets day later this year, JP Morgan analysts wrote.
Other automakers are also being forced to rethink.
Oliver Blume, CEO of Volkswagen, Europe’s largest carmaker by sales, has warned that the traditional export model that buoyed Germany’s auto industry for years no longer delivers.
It has undertaken a major restructuring that has embedded the company more deeply in China, where local brands have taken market share from foreign imported autos in recent years. Cut-throat competition in China has only intensified after a downturn in domestic car sales extended into an eighth consecutive month in May. The Chinese price war has spilled into the European market as Chinese automakers compete with Europe’s premium brands, causing Porsche to change its long-term assessment of what used to be its profit driver.
