BMW's New CEO Faces an Early Reckoning as China Slump Forces Deep Cost Cuts

BMW's Q2 margin halves to 2.3% amid China downturn, triggering 8,000 job cuts and cost-saving measures under new CEO Milan Nedeljkovi?.

The honeymoon period for Milan Nedeljkovi? has ended almost before it began. Barely two months into his tenure as BMW's chief executive, the man who took the helm in mid-May is confronting the steepest profit collapse the automaker has experienced in recent memory — and the response is reshaping everything from its workforce to its factory footprint.

Second-quarter figures released Thursday laid the damage bare. The automotive margin tumbled to 2.3 percent, less than half the 5.4 percent posted a year earlier, while group revenue contracted roughly 8 percent to €31.3 billion. The culprit is unmistakable: China, BMW's single most important market, where deliveries plunged 30 percent year-on-year as domestic rivals wage a brutal price war and consumers keep their wallets shut.

The scale of the Chinese downturn caught even the most bearish analysts off guard. It has also forced BMW into a sweeping cost-reduction program that will eliminate up to 8,000 positions worldwide starting in October, with planning and administrative functions bearing the brunt. New employment contracts signed from April 2027 onward will carry a 35-hour work week, scrapping the 38-to-40-hour terms previously offered to incoming hires. The company has also tightened remote-work rules to eight home-office days per month and trimmed holiday bonuses and other perks.

A Sector-Wide Squeeze

BMW is far from alone in feeling the pinch. Porsche is cutting roughly 5,000 jobs in the Stuttgart region and 8,900 across the group. Both manufacturers have pledged to keep their German plants open through 2035 and ruled out compulsory redundancies, yet the broader industry picture remains grim. German automakers collectively shipped just 6.3 million vehicles in the first half of 2026, down 6 percent, with China volumes off 25 percent to 1.4 million units. Last year, VW, BMW and Mercedes together sold fewer than 3.9 million cars in China — their lowest combined market share since 2011.

The VDA, Germany's auto industry association, points to high energy costs, tax burdens and bureaucracy as structural handicaps for domestic production. That helps explain why BMW and Mercedes are steadily shifting manufacturing eastward to lower-cost sites such as Kecskemét and Debrecen.

The macroeconomic backdrop offers little comfort. German unemployment climbed to 3.007 million in July, up 71,000 month-on-month, pushing the jobless rate to 6.4 percent. The HDE consumer barometer slid to 94.18 points in August, well below last year's level, while the Ifo business climate index held at 86.6 points in July. Even a domestic recovery would do little to offset the demand vacuum in China.

Stock Under Pressure

Investors have already voted with their feet. The shares closed Friday at €59.46, down 1.69 percent on the day, leaving the stock 36.35 percent lower since the start of the year. At its December 9, 2025 peak of €97.90, the equity has surrendered 39.26 percent and now trades well beneath its 50-day moving average of €63.32, hovering just a few percentage points above its 52-week low.

Analyst reactions have been measured but cautious. Bernstein Research maintains an "Outperform" rating while trimming its price target from €85 to €82, arguing BMW must win back investor confidence through strict cost discipline. The DZ Bank has downgraded the stock to "Hold" and cut its fair value from €75 to €65. RBC Capital Markets holds its target at €62 with a "Sector Perform" stance.

Glimmers of Hope

Not everything is bleak. BMW's new plant in Debrecen, Hungary, has already rolled out its 50,000th iX3 — just nine months after production began, the fastest ramp-up for a new facility in company history. The iX3 is the first model built on the "Neue Klasse" platform, the architecture BMW is betting on for its future, and order intake is approaching 100,000 vehicles. The company added a second shift at the plant back in February to keep pace.

Meanwhile, Nedeljkovi? is seeking shelter in North America. Reports indicate he is courting influential US dealers to secure special treatment on threatened import tariffs, with the Spartanburg plant playing a pivotal role in BMW's global export network. The aim is to reduce dependence on Asia by stabilizing the North American business.

Whether the job cuts and efficiency drive will be enough depends largely on how quickly China recovers — or whether the structural shift toward domestic Chinese manufacturers proves permanent. Investors will be looking for answers at the capital markets day slated for late September, where management is expected to detail the "Neue Klasse" scaling plans and outline how profitability can be restored by 2027. For now, the cost-cutting addresses the immediate pain but leaves the deeper question of demand unresolved.