TL;DRBMW cut its car division’s expected operating margin to 1-3 per cent, down from 4-6 per cent, citing an accelerating decline in China and Middle East fallout. The warning highlights a two-front squeeze as Chinese carmakers erode European automakers’ profits in China while gaining nearly 10 per cent market share in Europe.
BMW on Tuesday cut its full-year profit forecast for the car business, lowering its expected automotive EBIT margin to a corridor of 1 to 3 per cent from prior guidance of 4 to 6 per cent. The company blamed an accelerating decline in the Chinese market and the widening economic fallout from the conflict in the Middle East.
BMW’s stock fell to its lowest level since 2020 on the news. Deliveries in China dropped 17.6 per cent in the first five months of the year as domestic brands including BYD, Xiaomi, and NIO undercut European premium pricing with comparable technology.
The vanishing China profit pool
BMW is not alone. European automakers have been progressively squeezed out of the Chinese market, where cheaper, domestically produced electric vehicles have gained share at the expense of the premium combustion-engined cars in which companies like BMW, Mercedes-Benz, and Volkswagen specialise.
