BMW Shares Plunge After Profit Warning

BMW's shares fell by more than 7%, reaching their lowest level since November 2020, after the German automaker issued a profit warning on Tuesday. The company blamed ongoing weakness in China and the impact of the Iran war on prices and customer sentiment.

The premium carmaker lowered its operating auto margin to between 1% to 3%, down from the previous range of 4% to 6%. BMW also announced plans to intensify cost-cutting measures, which will result in a negative one-off impact in the second half of 2026. The profit warning came after a change of CEO last month when Milan Nedeljkovic took over from Oliver Zipse.

Analysts at Deutsche Bank and Jefferies noted that the outlook cut was significantly larger than expected. They suggested that the overhaul will largely impact German operations and may address a global assembly footprint business model still centered on exporting ICE powertrain components from Germany.

The profit warning weighed on the broader European auto sector, with shares in BMW's German rivals Volkswagen and Mercedes-Benz also coming under pressure. For decades, European carmakers' margins were boosted by strong business in China, but they have been overtaken by local brands in recent years. Cut-throat competition in China has only intensified after a downturn in domestic car sales extended into an eighth consecutive month in May.

Despite the challenges, BMW supervisory board chairman Nicolas Peter expressed confidence in the U.S. market on Thursday, describing it as stable and important. However, he noted that BMW is selling less in Europe than it manufactures locally. Peter also predicted that the European auto market could be up to 60% electric by 2035.

BMW's supervisory board chairperson Nicolas Peter stated on Thursday that the company is 'on the right track' with its next-generation models, despite a recent profit warning. Orders for BMW’s Neue Klasse models are strong and beneficial for both the manufacturer and suppliers involved in the project. The Neue Klasse line represents an overhaul of BMW's range amid fierce competition and falling sales in China.

BMW shares fell again on Thursday, hitting their lowest since November 2020. They closed down 4% after brokerages including Citi and HSBC cut target prices. Analysts at Berenberg wrote that the magnitude of this latest downgrade is greater than anticipated, potentially prompting a more profound strategic reset under incoming CEO Milan Nedeljkovic.

Analysts have suggested BMW may cut capacity in Europe and accelerate efforts to localize production in North America and China. Peter declined to comment on financial outlook or broader strategy but emphasized that Europe remains a pillar of the global export business. He warned about regulation bogging down the region, reiterating opposition to the EU's proposed ban on new combustion-engine cars from 2035.