BMW stock remains under pressure ahead of the company’s upcoming Capital Markets Day, with UBS expecting the German automaker to adopt a more cautious medium-term outlook.
The investment bank believes BMW could set a 2028 automotive EBIT margin target of 3%-5%, below the current market consensus of around 5.1%.
BMW Capital Markets Day in Focus
BMW is scheduled to hold its Capital Markets Day on September 29-30, with updated financial targets expected to be announced on September 30.
UBS expects the company to keep its long-term automotive EBIT margin ambition of 8%-10%. However, the bank believes BMW may push the timeline for reaching that target beyond 2030.
According to UBS, a reduction of 20%-25% to the current 2028 automotive EBIT consensus would be significant enough to attract investor attention.
UBS Sees Pressure on BMW Profit Margins
UBS also considers the current 2027 EBIT margin consensus of 3.7% too optimistic.
The bank believes BMW’s automotive margin could instead fall toward 2%-3% in 2027, as several cost pressures are expected to peak during that year.
UBS estimates that BMW’s automotive EBIT margin run rate during the second half of 2026 could fall below 2%.
Cost savings are expected to improve profitability gradually, but UBS believes the benefits will take around two years to become fully visible.
Costs and Currency Headwinds Could Weigh on BMW
Using a normalized 2026 EBIT margin run rate of 2.5%, UBS estimates that known pressures from commodities, depreciation, amortization and foreign exchange could total approximately €1.3 billion.
Most of these headwinds are expected to affect BMW in 2027.
However, UBS expects around €700 million of relief in 2028 as the purchase price allocation related to BMW’s China joint venture gradually phases out.
BMW May Need €2.3 Billion in Cost Savings
Assuming vehicle volumes, pricing and product mix remain broadly unchanged between 2026 and 2028, UBS estimates that BMW would need approximately €2.3 billion in cost reductions to reach its forecast margin targets.
The company has already announced around 8,000 overhead job cuts.
UBS estimates those reductions could generate about €1 billion in annual savings, meaning less than half of the required cost reduction would currently be covered.
China Remains a Key Challenge for BMW
UBS expects BMW’s global vehicle volumes to remain broadly flat between 2026 and 2028.
The bank believes there is still a risk of further weakness in China, even if growth in other regions is supported by the launch of BMW’s Neue Klasse vehicles.
UBS said BMW had previously been too optimistic about vehicle volumes and pricing, particularly in the Chinese market.
China has been an important source of pressure for the company, contributing to several recent profit warnings.
Shareholder Returns Could Remain Limited
UBS also sees limited potential for BMW to significantly increase shareholder returns under the current operating environment.
The bank expects BMW to maintain a 30%-40% dividend payout ratio and use remaining free cash flow for share buybacks.
However, this approach could fall short of some investor expectations.
Restructuring-related cash outflows of more than €1 billion across 2027 and 2028 could also place additional pressure on free cash flow.
UBS currently forecasts BMW’s free cash flow target for 2028 at approximately €4 billion, below the consensus estimate of €4.7 billion.
No Major BMW Strategy Overhaul Expected
Despite the upcoming Capital Markets Day, UBS does not expect BMW to announce a major strategic overhaul.
The bank believes the Neue Klasse program has made a promising start, including early signs of progress in China.
Attention is also expected to focus on new CEO Milan Nedeljkovic, who is likely to outline his priorities and medium-term strategy for the company.
BMW closed at €57.88 on September 23, giving the automaker a market capitalization of approximately €32.4 billion.
UBS currently maintains a neutral rating on BMW shares with a 12-month price target of €70.
BMW Stock Investors Await New Targets
BMW’s Capital Markets Day could be an important event for investors looking for greater clarity on profitability, cost reductions and future growth.
With margins under pressure and China remaining a major challenge, the market will be watching closely to see whether BMW adopts more conservative targets for 2027 and 2028.
The company’s ability to reduce costs while successfully expanding the Neue Klasse lineup could play a major role in determining the future direction of BMW stock.
