TLDR
- BMW stock fell around 7% on Wednesday, hitting its lowest level since November 2020
- The company slashed its 2026 automotive EBIT margin guidance to 1–3%, down from 4–6%
- China sales were down 19.4% year-to-date through May, with the market forecast now showing a 14.3% contraction
- BMW cited the Iran war’s impact on energy prices and consumer sentiment as a further drag
- Jefferies cut its price target on BMW to €70 from €92 and maintained a “hold” rating
BMW stock dropped around 7% on Wednesday after the German automaker issued a sharp profit warning late Tuesday, cutting its full-year automotive EBIT margin guidance to 1–3% from 4–6%.
Bayerische Motoren Werke AG, BMWYY
The stock hit its lowest level since November 2020. The warning also weighed on the broader European auto sector, dragging down Volkswagen and Mercedes-Benz.
Chief Financial Officer Walter Mertl told analysts the cuts were driven by a steep sales collapse in China and fallout from the Middle East conflict. He said effects from the Iran war on energy prices and consumer sentiment went “beyond our original assumptions.”
BMW’s sales in China fell 10% year-on-year in Q1 and were down 17.6% in the first five months of 2026. Year-to-date sales through May were already down 19.4%.
Mertl noted that the China Passenger Car Association has repeatedly lowered its full-year market forecast, from flat growth expected in December 2025 to a 14.3% contraction in its most recent forecast published Monday.
Group profit before tax is now expected to decline by a larger amount than previously guided. Automotive return on capital employed was cut to 1–5% from 6–10%.
BMW also lowered its delivery guidance for the automotive segment to a slight decrease versus the prior year. It had previously guided for deliveries at the same level as 2025.
The company said it still expects automotive free cash flow above €2.5 billion for the year and maintained its dividend payout ratio of 30–40%.
A Bad Start for the New CEO
The warning came just six weeks after BMW confirmed its outlook during Q1 results — and just a month after Milan Nedeljković took over as CEO from Oliver Zipse.
JP Morgan analysts described the warning as “radical.” Deutsche Bank noted: “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.”
BMW said it would intensify cost-cutting following around €2.5 billion in cuts made in 2025. The additional measures will carry a one-time negative impact in H2 2026, with benefits expected in subsequent years.
Nedeljković said further details would be provided at a Capital Markets Day in the last week of September.
Analyst Reaction
Jefferies cut its price target on BMW to €70 from €92, keeping a “hold” rating. The broker said the size of the margin cut suggested BMW “could be rethinking a global assembly business model still largely based on exporting ICE powertrain from Germany.”
Jefferies lowered its 2026 automotive EBIT margin estimate to 2% from 5.2% and cut its 2026 revenue forecast by 3% to €128.70 billion.
JP Morgan analysts said the restructuring could result in a 10–15% capacity cut at BMW’s German operations, potentially announced at the September Capital Markets Day.
Brokerage Jefferies added that the overhaul may accelerate localisation in markets including China and North America.
BMW maintained its third share buyback program.
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