BMW Bets on Electric i3 to Counter China-Driven Profit Shock and Job-Cut Fears

BMW opens orders for its new i3 electric vehicle as shares hit five-year low, profit margins slashed, and job cut talks begin amid China demand slump.

BMW finds itself in a peculiar position: rushing forward with its next-generation electric vehicle while simultaneously scrambling to contain a deepening crisis in its core business. The Munich-based automaker opened order books for the highly anticipated i3 "First Edition" on 18 June, a move designed to showcase its technological ambitions. Yet the same week saw the stock hit a five-year low, a profit warning that slashed margin expectations, and intensifying speculation about job reductions.

The contrast could hardly be starker. Customers can now reserve the i3 50 xDrive for €75,340, with series production set to begin in August. The model is the spearhead of BMW’s "Neue Klasse" platform, a sweeping overhaul of its electric vehicle architecture. But on the same day the order books opened, the company’s shares touched €58.80, their lowest level since 2020. A modest bounce to €60.38 by the close of the week did little to mask the broader rout: the stock has shed roughly 37% since the start of the year and trades 38% below its December high of €97.90. Technical indicators point to deeply oversold conditions, with the relative strength index at 20.5.

The trigger for the sell-off was BMW’s drastic revision of its 2026 outlook on 16 June. The automaker now expects an operating margin of just 1% to 3% for its automotive segment, down sharply from a previous forecast of 4% to 6%. The free cash flow target in the car division was cut from more than €4.5 billion to over €2.5 billion, reflecting one-time charges in the second half that will weigh on earnings. Cost savings from ongoing efficiency programmes will take several years to materialise, leaving the 2026 income statement exposed.

China is at the heart of the problem. Demand for non-electrified vehicles there has accelerated its decline, and European premium manufacturers are struggling to compete on price in the compact segment. JPMorgan analyst Jose Asumendi described the situation as a "wake-up call for the auto industry." Even stronger performances in Europe and the United States have been unable to offset the Chinese slide. Rising energy costs linked to the Middle East conflict have added further pressure.

The market’s response has been swift and brutal. UBS lowered its price target on BMW from €88 to €70, maintaining a "Neutral" rating. Goldman Sachs also cut its target, while Moody’s changed its outlook on the company’s "A2" long-term rating to negative. The credit agency left the rating itself unchanged but made its concern clear.

Against that backdrop, BMW is also wrestling with personnel costs. Talks between management and the works council over potential staff reductions are under way, though the company has stopped short of confirming any specific job cuts. A works council spokesperson said on Friday that preparations for formal negotiations were being made. BMW is bound by a job security agreement that protects employees in Germany from compulsory redundancies, meaning any headcount reductions must come through voluntary measures. Already last year, the workforce shrank by around 3,000, mainly in Germany and China.

Chief executive Milan Nedeljkovic, who took over the reins only recently, has been vague about the exact impact on jobs. He said he wanted to "significantly intensify and accelerate existing measures", without specifying whether that would lead to layoffs. Meanwhile, the company is pressing ahead with a major retooling of its Leipzig plant. Production there will be halted for 5.5 weeks over the summer as the factory is reconfigured for the Neue Klasse. The investment, announced in late 2025, runs into the hundreds of millions of euros. More than 11,600 people work at the site, and the plant manager, Petra Peterhänsel, has made clear the changes are essential to prepare for the next generation of vehicles.

BMW still plans to launch more than 40 new or updated models over the next two years, and it says early demand for the electric iX3 in Europe is strong. The dividend payout ratio of 30% to 40% remains formally in place, though lower earnings will inevitably mean smaller absolute distributions.

The central question for investors is whether the Neue Klasse offensive can rebuild confidence faster than the Chinese market erodes profits. For now, the i3’s early arrival signals a company determined to fight on two fronts — even as the financial storm gathers on one of them.