Key facts
- BMW plans to increase local production and cut costs to improve profit margins.
- Bernstein analysts expect BMW to set a mid-term automotive division margin target of 3% to 5% by 2028.
- The company aims to restore automotive division margins to 8% to 10% by the early 2030s.
- BMW will invest €2 billion in German production of its next-generation 3 Series sports sedan.
- The Neue Klasse range, including the electric iX3 SUV, is central to BMW's recovery plan.
German premium carmaker BMW is set to unveil plans for increased local production and cost-cutting measures as it seeks to rebuild profit margins following a series of profit warnings linked to weak performance in China. The company's strategy update was due to be presented at a capital markets day for investors on Wednesday.
Bernstein analysts, after meeting with BMW management, outlined key elements of the plan. They noted that BMW's reputation for resilience was impacted by a profit warning in June, its third in over three years, which was tied to the Chinese market. This setback highlights challenges for European carmakers facing declining sales in China and US tariffs.
In response, the Munich-based automaker is implementing a redundancy program expected to affect approximately 8,000 jobs in Germany, mirroring cost-cutting efforts by Volkswagen and Mercedes-Benz. BMW's shares have fallen over a third in the past year to their lowest level in over six years.
Bernstein forecasts that BMW will set a mid-term margin target of 3% to 5% for its automotive division by 2028, aiming to restore margins to 8% to 10% by the early 2030s, a significant improvement from its recent 2.3% result. Shares in the company were trading 1.4% higher at 0744 GMT.
Analyst Stephen Reitman stated that BMW understands the solution involves more than just cost-cutting, emphasizing growth through innovative products. The Neue Klasse range, led by the electric iX3 SUV, is considered central to the recovery plan. BMW also plans to launch a luxury SUV positioned above the X7 and expand its M and Alpina ranges from 2027 to bolster its premium offering, according to Bernstein.
Separately, BMW announced an investment of approximately €2 billion ($2.3 billion) in German production of its next-generation 3 Series sports sedan. Bernstein indicated that BMW's European and US plants are operating at full capacity, with China being the primary area requiring production adjustments and capacity flexibility.