BMW issues 3rd profit warning as China slump deepens, shares drop 7%

BMW was the worst performing major European stock Wednesday after the luxury-car maker cut its 2026 profit outlook for the third time in two years, blaming a deepening downturn in China and the impact of the Middle East war.

"The impact of the conflict in the Middle East on our global business extends beyond our original assumptions," the company said in a statement. High energy prices are weighing on cost structures and "the lack of stability due to the conflict is negatively impacting consumer sentiment across markets around the world."

BMW now expects pretax profit to fall significantly this year, versus a prior expectation of a moderate decline. Automotive segment margins are forecast at 1% to 3%, down from 4% to 6% previously, and vehicle deliveries are expected to slip versus an earlier forecast for a flat performance. Analysts at Jefferies led by Philippe Houchois said the new guidance implies a €3 billion ($3.5 billion) reduction to operating profit forecasts.

The downgrade marks a sharp reversal for BMW, which had weathered the industry's recent upheaval better than German peers Volkswagen and Mercedes-Benz. The company said it will "intensify and accelerate" cost-cutting through further structural and efficiency measures, though it warned the savings will weigh on earnings in the second half of the year. BMW's capital-markets day in September now takes on added importance as investors await a major strategy shift.

BMW shares fell 7%, bringing this year's decline to 31%. Mercedes-Benz shares dropped 3%, while Volkswagen shed 2%. In China, car sales fell almost 20% year-on-year between January and May, according to the China Passenger Car Association, with non-electric vehicles hit particularly hard.

Analysts at Deutsche Bank said the stock will struggle until the new plan is announced in September. "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," they said. "We are also still somewhat puzzled by the size of the cut."

The profit warning signals that even premium automakers are not immune to the structural slowdown in China, the world's largest car market, where local rivals are gaining share. BMW's strategic margin target of 8% to 10% is now in question given the lower base. Investors will watch the capital-markets day in September for details on the company's revised global assembly model and cost-reduction plan.

This article is for informational purposes only and does not constitute investment advice.