BMW's China Crisis Forces a Hard Reset: 8,000 Jobs Cut as Margins Hit the Floor

BMW reports steep profit drop as China deliveries tumble 30%, triggering 8,000 job cuts and €1 billion in restructuring provisions through 2027.

The numbers coming out of BMW's half-year report paint a stark picture of an automaker caught in a perfect storm. Net profit for the second quarter fell to €1.2 billion, a 35 percent drop from a year earlier, while revenue slipped to €31.26 billion — missing the analyst consensus of €32.26 billion. The auto division bore the brunt of the damage, with operating profit plunging roughly 60 percent to €629 million and the EBIT margin collapsing from 5.4 percent to just 2.3 percent. Group EBIT slid 39 percent to €1.63 billion.

The trajectory over recent years underscores just how steep the decline has been. Half-year net profit stood at €6.6 billion in 2023, fell to €5.7 billion in 2024, dropped further to €4.0 billion in 2025, and now sits at just €2.9 billion for the first six months of 2026.

China: The Unrelenting Drag

CEO Milan Nedeljkovi?, who took the helm amid this turbulence, pointed squarely at China as the primary culprit. Deliveries in the world's largest auto market tumbled 30.2 percent in the second quarter to 117,815 vehicles, bringing the first-half decline to roughly 20 percent. Nedeljkovi? acknowledged during the earnings call that while the results matched the company's revised guidance, they were far from satisfactory, noting that competitive, regulatory, and geopolitical pressures are intensifying at a rapid clip. Auto analyst Ferdinand Dudenhöffer was more blunt, arguing that BMW's long-standing business model in China has simply stopped working.

Globally, the picture was less dire but still negative. BMW delivered 590,962 vehicles in the second quarter, a 4.9 percent decline, as stronger performances in the US and European markets partially offset the Chinese rout. For the full year 2026, the company confirmed its already-lowered outlook: an auto division EBIT margin of 1 to 3 percent and a drop in pre-tax group profit of more than 15 percent.

8,000 Jobs on the Chopping Block

In response to the earnings collapse, BMW has struck a deal with its works council to slash around 8,000 positions worldwide by the end of 2027 — roughly 5 percent of its total workforce. In Germany, where the company employs 84,000 people, some 50,000 workers in indirect areas such as administration, development, sales, and management will receive voluntary severance packages starting in October 2026. The company has ruled out compulsory layoffs and exempted production staff from the cuts.

The restructuring carries a hefty price tag. BMW is setting aside roughly €1 billion in provisions, with additional restructuring costs in the hundreds of millions. Starting in April 2027, high-performing employees will be moved to standard 35-hour contracts. CFO Walter Mertl pointed to €2.5 billion in savings already achieved in 2025 and flagged further efficiency measures, including greater use of artificial intelligence. As for the medium-term margin target of 8 to 10 percent in the auto division, Nedeljkovi? now says that milestone is unlikely before 2030.

A Glimmer of Hope: The Neue Klasse

Amid the gloom, BMW's next-generation electric vehicles offer a potential bright spot. The company has already produced more than 50,000 units of the iX3 electric SUV, with orders approaching the 100,000 mark. The i3 sedan also saw strong demand at the start of pre-orders. Investors will get a deeper look at the Neue Klasse strategy during the Capital Market Day scheduled for September 29.

Recall and Battery Production: Mixed Signals

The company is also dealing with a significant quality issue. Last Friday, Germany's Federal Motor Transport Authority ordered a recall of 744,234 vehicles across the 2 Series to 7 Series, X3 to X7, Z4, and i3 model lines from the 2020 to 2026 model years due to a starter relay defect that could cause a fire hazard. On a more positive technological note, BMW began series production of sixth-generation high-voltage batteries at its Woodruff plant in South Carolina, destined for the upcoming iX5 built at the neighboring Spartanburg facility.

Boardroom Changes and Capital Moves

The leadership shake-up extends beyond the CEO's office. The supervisory board approved the appointment of Dorothea von Boxberg to the management board effective September 1, 2026. Meanwhile, the company completed the conversion of all non-voting preference shares into voting common shares on June 30, following a shareholder vote at the May 13 annual general meeting. Despite the weak operating environment, BMW continues its share buyback program, purchasing 634,883 of its own common shares between July 20 and July 26.

Analyst Views Diverge

Wall Street is split on BMW's prospects. Jefferies analyst Philippe Houchois kept a "Hold" rating with a €70 price target, noting that the auto division's operating profit met consensus and that free cash flow came in better than expected. HSBC upgraded the stock from "Hold" to "Buy" on July 22 with a €71 target, arguing that China risks are now largely priced in after the year-to-date selloff. Deutsche Bank Research reaffirmed its "Buy" rating with a €90 price target just two days before the earnings release, though it warned of ongoing margin pressure from Asian price competition.

The stock itself closed at €60.20 on Wednesday, roughly 24 percent below its 200-day moving average of €79.71. It has lost 35.56 percent since the start of the year, though it has recovered 5.43 percent over the past seven trading sessions. After hitting a 52-week low of €56.40 on July 24, the shares have edged back to around €60.26, still a far cry from the highs of the past year as the China-driven earnings collapse continues to weigh on the company's valuation.