German carmaker BMW has issued its second profit warning in a year, blaming the financial burden of a restructuring programme that includes 8,000 planned job cuts as it grapples with intensifying competition from Chinese rivals. The company has slashed its profit margin forecast to between -0.5% and 0.5% for this year, signalling a potential loss in its automotive division after previously projecting a margin of 4-6%. According to The Guardian, the downgrade reflects fourth-quarter costs tied to the restructuring programme.
BMW is the latest major German automaker to cut its profit outlook. Mercedes-Benz issued a similar warning last week, while Western carmakers have struggled to compete with lower-cost Chinese manufacturers, resulting in reduced sales in China and increased exports to Europe. The sector faces a period of significant upheaval as companies pursue costly transitions to electric vehicles while managing labour reductions.
In the third quarter, BMW reported pre-tax earnings of €2.1bn (£1.75bn), representing an 11% decline from the same period a year earlier. Net profit fell about 15% to €1.45bn, while worldwide vehicle deliveries dropped 6.3%. Revenue declined 6% to €30.4bn, driven primarily by weakness in the Chinese market.
Sales in China fell 22% in the first nine months of the year, though BMW characterised this decline as consistent with the broader market downturn in that region. However, deliveries in China fell 24.8%, indicating BMW's performance lagged the overall market contraction.
What is driving the restructuring?
The company is accelerating its shift toward electric vehicles and writing off portions of its existing vehicle and technology platforms. This transition requires substantial capital investment while simultaneously incurring redundancy costs. CEO Milan Nedeljković stated that
current developments in our industry call for decisiveness and swift implementation. We will therefore specifically intensify and accelerate structural measures.
BMW launched the redundancy programme in July with an initial target of cutting 8,000 jobs in Germany by the end of 2027. However, Nedeljković did not specify whether the total would exceed the previously announced 8,000, saying cuts would go as far as made sense for the company. The company also plans to streamline management functions more rapidly as part of its restructuring drive.
How does this compare to rivals?
BMW's situation reflects broader challenges across the German automotive sector. Volkswagen Group, which owns multiple premium brands, is pursuing even more aggressive cost reductions. The parent company has approved plans to eliminate up to 100,000 jobs globally by 2030 as it confronts declining profits and Chinese competition. Jaguar Land Rover, meanwhile, is cutting 4,000 jobs over two years as part of a £1.7bn cost-saving initiative driven by declining sales and the expensive transition to electric vehicles.
Mercedes-Benz also reported lower third-quarter profits, though Porsche rebounded slightly after steep charges in the previous year related to its model lineup overhaul and retreat from China.
What do the financial metrics reveal?
The operating margin in BMW's core automotive business narrowed to 3.4% in the third quarter, beating analyst expectations of 3.1% but declining sharply from 5.2% a year earlier. Excluding restructuring charges, the margin would have reached above 2%, remaining within the company's previous forecast range. BMW's long-term target for its core automotive operating margin is 8% to 10%, indicating the current performance falls well short of strategic objectives.
The company has revised its 2026 forecast for automotive deliveries to expect a moderate decrease, defined as a decline of 5% to 9.9%. This represents a significant downgrade from earlier expectations and underscores the severity of market headwinds.
What is BMW's strategy going forward?
Despite the challenging near-term outlook, Nedeljković emphasised that China
remains a key focus, with the group's Neue Klasse revival beginning in the Chinese market this month through the launch of the iX3. This new generation of vehicles represents BMW's attempt to compete more effectively in the world's largest automotive market.
Notably, BMW shares rose on Wednesday despite the lowered outlook and quarterly profit decline, suggesting investors view the restructuring as a necessary step toward long-term recovery. The market reaction indicates confidence that the company's cost-cutting and product transition measures will position it more competitively once the transition period concludes.
