On Wednesday, BMW announced a significant cut to its 2026 profit outlook, attributing the decision to a slowdown in demand from China and the impact of elevated energy prices resulting from the ongoing conflict in Iran.
The company stated that while it has seen positive sales growth in Europe and the USA, these gains are insufficient to offset the decline in sales in China and the Asia Pacific region. As a result, BMW's pre-tax profit is now expected to decrease 'significantly,' leading to a 6.5% drop in its share price.
Analysts from Deutsche Bank expressed concerns following BMW's conference call, noting that it raised more questions than it answered, particularly regarding the company's cost structures. Citi analysts have revised their sales projections for China down by over 50,000 units, predicting total sales will fall below 500,000 by year-end.
They highlighted a lack of positive narratives for BMW's equity, compounded by ongoing pressures from EU regulations and a challenging competitive landscape, particularly from Chinese automakers. This profit warning has also negatively impacted BMW's German competitors, Volkswagen and Mercedes-Benz, which are facing similar challenges.
Volkswagen's CEO pointed to geopolitical tensions and trade barriers as significant headwinds. The European auto sector is increasingly threatened by the rapid expansion of Chinese electric vehicle manufacturers, which are gaining market share globally.
In response to these challenges, some European automakers are exploring opportunities in the defense sector, aiming to leverage increased military spending in Europe