BMW Forecasts Significant Profit Drop Amidst China Slowdown and Middle East Crisis

Munich-based carmaker BMW AG is forecasting a "significant" decrease in its pre-tax profit this year, largely due to weakening demand in China and the impact of the Middle East crisis.

BMW, owner of the BMW, MINI, Rolls-Royce and BMW Motorrad brands, cited worsening market conditions and the cost of restructuring measures in a profit warning issued on Tuesday.

The announcement sent its shares down more than 7% in Europe on Wednesday morning.

"BMW shares hit the brakes after guiding for a big drop in profits," said Russ Mould, investment director at AJ Bell.

"The Iran war has had a negative impact on consumer sentiment, and that's dampened demand for its vehicles," Mould added.

The carmaker said demand in China had weakened further, resulting in more intense competition across the region.

It also noted that the Iran war has had a greater-than-expected impact, keeping energy costs elevated and weighing on consumer demand. According to BMW, sales in Europe and the US have improved, but not enough to offset the slowdown in China.

The company now expects vehicle deliveries to decline slightly compared with last year, rather than remain stable.

As a result, BMW now forecasts a significant drop in profit before tax from last year's €10.2 billion. Previously, the company had guided for a moderate decline in 2026.

BMW has also cut its profitability targets, forecasting an automotive EBIT margin of 1%-3%, down from its previous guidance of 4%-6%, and a return on capital employed (ROCE) of 1%-5%, compared with the earlier range of 6%-10%.

The carmaker also outlined plans to intensify and accelerate its ongoing cost-cutting efforts through additional structural and efficiency measures. These are expected to have a one-off negative impact on earnings in the second half of 2026.

Milan Nedeljković, chairman of the Board of Management of BMW AG, said: "We will adapt our current structures and processes to the drastic downturn in market conditions. It is our entrepreneurial responsibility, therefore, to significantly intensify and accelerate our ongoing measures. It's all about speed and efficiency."

The announcement reflects wider pressures facing Europe's carmakers, according to analysts.

Mould said, "The natural response is to look for ways to cut costs in the business, but messaging from the broader automotive sector would suggest BMW simply joins a growing line of car makers stuck in the slow lane for the foreseeable future.”

The BMW Group continues to expect automotive free cash flow of more than €2.5 billion. Its dividend payout ratio of 30%-40% of net income attributable to BMW AG shareholders, as well as its ongoing share buyback programme, remain unchanged.

The company's half-year results will be published as scheduled on 30 July 2026.