BMW’s China Headache Deepens: Margins Crumble, 8,000 Jobs to Go, but the iX3 Offers a Glimmer

BMW's Q2 profit crashed 60% in its core auto division, but shares held steady. New CEO Nedeljkovi? cuts 8,000 jobs, while EV sales rise 5.2% and a 744,000-vehicle recall adds pressure.

BMW’s second-quarter results have laid bare the scale of the automaker’s challenges, with a 39% plunge in group earnings before interest and taxes and a brutal 60% collapse in operating profit from its core automotive division. Yet the share price has remained largely unfazed, trading around €60.30, as investors had already braced for bad news following the profit warning issued back in June.

The numbers tell a stark story. Revenue slipped roughly 8% to €31.3 billion in the second quarter, while the automotive segment’s EBIT margin cratered to 2.3% from 5.4% a year earlier. For the full year, BMW now expects that margin to land between 1% and 3% — a far cry from the 8% to 10% range it achieved in 2024. The downgrade, first flagged in an ad-hoc announcement in mid-June, was formally confirmed in Thursday’s half-year report.

China remains the primary culprit. First-half deliveries in the world’s largest auto market tumbled 20.4%, a decline that gains in Europe (up 5.4%) and the United States (up 3.0%) could not offset. Global sales for the period fell 4.2% to 1,156,742 units, underscoring how heavily BMW’s fortunes are tied to Chinese consumer demand.

A New CEO’s Baptism by Fire

Milan Nedeljkovi?, who took the helm in May, is already facing his first major test. The new chief executive has moved swiftly to address the cost structure, announcing plans to eliminate 8,000 administrative positions worldwide by the end of 2027. The cuts, to be achieved primarily through natural attrition and severance packages in Germany, are part of a broader efficiency drive that also targets production complexity.

The leadership shake-up extends beyond the top job. The supervisory board voted at the annual general meeting on May 13 to appoint Dorothea von Boxberg to the management board effective September 1, 2026, adding another layer of change to the executive suite.

A Global Recall Adds to the Pressure

Just as BMW was trying to steady the ship, a fresh operational headache emerged. The German Federal Motor Transport Authority flagged a recall affecting 744,234 vehicles worldwide — including roughly 42,300 in Germany — due to defective starter relays that pose a fire risk. The recall spans models from the 2 Series through the 7 Series, multiple X models, the Z4, and the i3, covering production years 2020 to 2026.

The Electric Bright Spot

Amid the gloom, BMW’s electric vehicle business continues to gain traction. Sales of fully electric cars rose 5.2% in the second quarter to 116,800 units, meaning nearly one in five vehicles sold — 19.8% — is now battery-powered. The upcoming Neue Klasse platform is generating particular optimism. The first model, the new iX3, is approaching 100,000 orders, a strong vote of confidence in BMW’s next-generation technology.

On the production side, the company has started series manufacturing of sixth-generation high-voltage batteries at its Woodruff plant in South Carolina, destined for the future iX5 being built at the nearby Spartanburg facility.

Analyst Views: Cautious Optimism

Despite the weak numbers, several analysts see value in the stock at current levels. Bernstein Research maintains an “Outperform” rating with a €85 price target, arguing that the bad news is now largely priced in. HSBC upgraded the shares from “Hold” to “Buy” on July 22, setting a €71 target, while Deutsche Bank Research reiterated its “Buy” call with a €90 target, though it warned of persistent margin pressure from price competition in Asia. Jefferies holds a more cautious “Hold” stance with a €70 target.

The stock, which has shed 35.56% since the start of the year, currently trades about 24% below its 200-day moving average of €79.71. A recent seven-day rally of 5.43% has offered some respite, and the relative strength index of 51 suggests the selling pressure may be easing.

Capital Market Day in Focus

Investors are now looking ahead to September 29, when BMW will host a Capital Market Day to flesh out its strategy for the Neue Klasse and outline how it intends to restore automotive margins to healthier levels. The company has also continued its share buyback program, purchasing 634,883 own common shares between July 20 and July 26, signaling that management sees value even in these turbulent times.

For Nedeljkovi?, the path forward is clear: stabilize China, execute the cost-cutting plan, and deliver on the promise of the Neue Klasse. The next few quarters will reveal whether that formula is enough to reverse the slide.