BMW shares fell more than 7% on Wednesday after the German automaker sharply reduced its 2026 automotive profit margin forecast. The company blamed the downgrade on weakening vehicle sales in China and the wider economic effects of the Middle East conflict.
The announcement represented one of BMW’s most significant profit warnings in recent years.
BMW Cuts Automotive Margin Forecast
BMW reduced its full-year automotive earnings before interest and taxes margin forecast to between 1% and 3%. The company had previously expected a margin of between 4% and 6%.
Chief Financial Officer Walter Mertl confirmed the revised outlook during an investor call held after BMW released an ad hoc market statement.
The company now expects group profit before tax to decline significantly. Its previous guidance had pointed to only a moderate decrease.
BMW also lowered its expected automotive return on capital employed to between 1% and 5%, compared with its earlier forecast of 6% to 10%.
Vehicle Delivery Outlook Lowered
BMW now expects automotive deliveries to fall slightly compared with the previous year. The company had previously forecast that deliveries would remain broadly unchanged.
Despite the weaker outlook, BMW maintained its expectation of generating more than €2.5 billion in automotive free cash flow during the year.
China Car Market Continues to Weaken
Mertl said the China Passenger Car Association had repeatedly lowered its forecast for the country’s automotive market.
In December 2025, the association expected the market to remain stable. However, its forecast was later reduced to a 7.6% decline in early May.
The expected contraction then widened to 11.2% during the third week of May. Its latest forecast, published on Monday, pointed to a 14.3% market decline.
According to Mertl, total vehicle sales in China had already fallen 19.4% during the first five months of the year.
BMW Sales Decline in China
BMW’s Chinese sales dropped 10% year on year during the first quarter. Sales were down 17.6% across the first five months of the year.
The automaker had previously maintained monthly sales of around 50,000 vehicles throughout 2025 and into early 2026. However, customer demand later weakened significantly.
Mertl said BMW could not avoid the effects of the broader market decline. He also pointed to increasingly intense competition among automakers in China.
The wider Asia-Pacific region recorded a double-digit fall in sales during April and May.
Growth in Europe and the US Fails to Offset China Slump
BMW reported positive developments in the United States and Europe. The company also expects support from sales of its iX3 electric vehicle and lower production costs for its sixth-generation battery packs.
However, Mertl warned that these improvements would not be enough to compensate for falling sales volumes in China and the wider Asia-Pacific market.
Middle East Conflict Adds Further Pressure
BMW also linked its weaker outlook to the continuing conflict in the Middle East.
According to the company, the conflict has increased global energy prices and damaged consumer confidence across several important markets.
Mertl said the economic consequences had become more severe than BMW initially expected.
BMW Plans Additional Cost-Cutting Measures
BMW said it would expand its existing efficiency and restructuring plans. The company had already reduced costs by approximately €2.5 billion during 2025.
The new measures are expected to create a one-time financial charge during the second half of 2026. However, BMW expects the savings and operational benefits to become visible in the following years.
Chairman Milan Nedeljković said the company would provide more information during its Capital Markets Day in the final week of September.
BMW maintained its dividend payout target of between 30% and 40%. It also confirmed that its third share buyback programme would continue.
Jefferies Cuts BMW Price Target
Jefferies lowered its BMW share price target from €92 to €70 while maintaining a “hold” rating.
The investment bank said the scale of the margin downgrade could suggest that BMW is reconsidering its global manufacturing strategy. The company currently relies heavily on exporting internal combustion engine powertrains from Germany.
Jefferies also reduced its estimate for BMW’s 2026 automotive EBIT margin from 5.2% to 2%.
In addition, the bank lowered its 2026 revenue forecast by 3% to €128.70 billion.
