BMW's New CEO Faces a Harsh Debut as China Sales Collapse and Margins Shrink

BMW reports 35% net profit drop to €1.2B in Q2 as China sales collapse 30%, prompting 8,000 job cuts and a lowered margin target of 1-3%.

Milan Nedeljkovi? has been in the top job at BMW for barely three months, and the numbers he presented on Thursday make for grim reading. The Munich-based automaker reported a 35 percent plunge in net profit to €1.2 billion for the second quarter, while revenue dropped 8 percent to €31.3 billion. The damage was most acute in the core automotive division, where the EBIT margin cratered from 5.4 percent a year earlier to just 2.3 percent.

The culprit, as it has been for much of 2026, is China. BMW's sales in the world's largest car market collapsed by roughly 30 percent in the quarter, with first-half deliveries sliding 20.4 percent — a decline that growth of 5.4 percent in Europe and 3 percent in the US could not offset. The group confirmed the drastically lowered full-year margin target of 1 to 3 percent for the auto segment, first flagged in an ad-hoc announcement back in June, down from the original 4 to 6 percent range.

8,000 Jobs on the Line as Cost-Cutting Accelerates

Nedeljkovi?, who formally took the helm at the annual general meeting in May, used the earnings release to flesh out the restructuring plan. BMW will cut around 8,000 administrative positions worldwide — roughly 5 percent of its workforce — by the end of 2027. In Germany, the reduction will be achieved through a voluntary severance program designed to stabilize the cost base amid structurally weaker demand and thinning margins.

The job cuts are the most tangible sign yet of how deeply the China crisis is reshaping the company. The same May shareholder meeting that handed Nedeljkovi? the CEO role also approved a dividend of €4.40 per share for the 2025 financial year — a payout that now sits awkwardly alongside the profit collapse.

A Quietly Bullish Undercurrent From the Analyst Community

Despite the bleak headline numbers, several analysts found reasons to look past the pain. Jefferies' Philippe Houchois noted that free cash flow in the automotive business came in "higher than expected" — a bright spot given the margin compression. Bernstein's Stephen Reitman observed that with the June profit warning already behind the market, the second-quarter operating result actually edged above the lowered consensus expectations. Bernstein had cut its price target from €108 to €85 in June after the initial guidance revision.

HSBC went a step further, upgrading BMW from "Hold" to "Buy" on July 22 with a €71 price target, arguing that the China risks were now largely priced into the stock after its year-to-date slide. Deutsche Bank Research reaffirmed its "Buy" rating with a €90 target on Tuesday, though it cautioned that pricing pressure in Asia would continue to weigh on margins.

Capital Moves and a Recall Complicate the Picture

The company completed a major structural change at the end of June, converting all non-voting preference shares into ordinary voting stock — a move approved at the May AGM that simplifies the shareholder structure but has no bearing on the operational slump. Trading in the preference shares has been halted.

Meanwhile, BMW pressed ahead with its share buyback program, acquiring 634,883 of its own ordinary shares between July 20 and 26. The buyback continues even as the company faces a significant recall: Germany's Federal Motor Transport Authority flagged a starter relay defect affecting 744,234 vehicles across the 2 Series through 7 Series, X3 through X7, Z4, and i3 models from model years 2020 to 2026, citing a potential fire risk.

A Flicker of Light From Hungary and South Carolina

Not everything is going wrong. BMW's new plant in Debrecen, Hungary, rolled its 50,000th iX3 off the assembly line, with an order backlog of nearly 100,000 units for the electric SUV. In the US, the company started series production of sixth-generation high-voltage batteries at its Woodruff, South Carolina facility, destined for the upcoming iX5 built at the neighboring Spartanburg plant.

These operational wins offer a counter-narrative to the China-driven gloom, though they have yet to move the needle on the group's overall financial trajectory.

The Stock: Bad News Priced In, But the Trend Remains Ugly

Investors took the earnings in stride. BMW shares traded at €60.76 on Thursday, up 0.93 percent on the day and extending a seven-session rally of 6.41 percent — suggesting the market had already braced for the worst. Still, the stock is down 34.96 percent year-to-date and sits 23.68 percent below its 200-day moving average, underscoring how deeply the profit warnings and China exposure have scarred the narrative.

All eyes now turn to the Capital Market Day scheduled for September 29, where BMW is expected to lay out the strategic vision for its "Neue Klasse" platform. For Nedeljkovi?, it will be the first major opportunity to convince investors that the company's future looks brighter than its present.