BMW's Two-Front Battle: i3 Production Ramps Up in Munich as Q2 Earnings Take a 35% Hit

BMW launches i3 series production in Munich as Q2 profit falls 34.9%, with China deliveries down 30.2% and EBIT margin forecast cut to 1-3%.

The assembly lines at BMW's Munich plant are humming with a new rhythm. On Sunday, the automaker kicked off series production of the i3, the second model in its much-vaunted "Neue Klasse" electric vehicle lineup, following the iX3. The timing is anything but casual: the launch lands squarely in a period of acute operational strain, with investors hungry for tangible proof that the company's EV pivot can offset mounting financial pressure.

The i3 50 xDrive delivers 345 kW of power and 645 Nm of torque, with a WLTP-rated range of up to 900 kilometers. BMW claims the vehicle can add roughly 400 kilometers of range in just ten minutes of charging. Batteries come from the Irlbach-Straßkirchen facility, while motors are produced in Steyr. The Munich plant, which is slated to transition entirely to electric production by 2027, is expected to see manufacturing costs drop by around ten percent as part of the broader modernization effort. Deliveries of the i3 are scheduled to begin this autumn, joining the 7 Series, which has been in production since July, and the X5 rolling out of the Spartanburg plant in the US.

The production milestone arrives against a sobering financial backdrop. BMW's second-quarter net profit fell to €1.2 billion, a 34.9 percent decline year-on-year. Revenue slipped from €34 billion to €31 billion in the same period, according to figures released on July 30. The automotive segment bore the brunt of the damage: operating profit there collapsed by more than 60 percent to €629 million, dragging the division's EBIT margin down from 5.4 percent to just 2.3 percent.

China remains the epicenter of BMW's troubles. Deliveries in the region dropped 30.2 percent year-on-year to 117,815 vehicles in the second quarter, with the first-half decline reaching 20.4 percent. The company had already scrapped its annual guidance back in June, shifting from expectations of stable delivery volumes to a projected slight decline. The automotive EBIT margin forecast for 2026 now stands at 1 to 3 percent, down from the previously targeted 4 to 6 percent. Beyond China's weakness, BMW cited the fallout from the Iran conflict — higher energy costs and greater customer uncertainty — as additional headwinds.

The global picture, however, is more nuanced. The core BMW brand delivered roughly 1.0 million vehicles in the first half, down 6.2 percent, while the broader BMW Group reached just over 1.16 million units, a 4.2 percent decline. Europe and the Americas tell a different story: European deliveries rose 5.4 percent to 496,651 units, and American sales climbed 3.0 percent to 244,044 vehicles. In Germany, new registrations edged up 0.5 percent in July, capping a first half that finished 5.4 percent higher at 151,410 vehicles.

The EV segment is showing signs of a rebound after a sluggish start to the year. Battery-electric vehicle deliveries rose 5.2 percent in the second quarter to 116,807 units, fueled by the iX3's European launch, where EV sales jumped 38 percent. The model has already attracted nearly 100,000 pre-orders globally, according to company figures. The i3, meanwhile, is said to have generated robust demand ahead of its market debut.

The weak earnings picture has forced BMW into a stringent cost-cutting drive. The company plans to shed roughly 8,000 positions by the end of 2027, with a voluntary severance program set to begin in October. More than half of those cuts are expected to hit BMW's 154,000-strong German workforce. CFO Walter Mertl emphasized the goal is reduced complexity and a leaner cost base, ruling out compulsory redundancies. BMW has earmarked a three-digit million-euro amount for 2026, with around €1 billion reserved for the personnel measures overall.

Analyst reactions have been measured. DZ Bank downgraded BMW from Buy to Hold on July 31, trimming its price target from €75 to €65. HSBC had moved the other way on July 16, upgrading from Hold to Buy while cutting its target from €79 to €71. Bernstein Research had already slashed its price target from €108 to €85 in late June, citing revised forecasts for revenue, margins, and cash flow, though it maintained its Outperform rating.

The stock has shown surprising resilience at the close of the week. The shares finished Friday at €59.82, up 1.94 percent, hovering just 6.06 percent above the 52-week low of €56.40 set in late July. Yet the year-to-date loss of 35.97 percent underscores just how deeply the June profit warning and disappointing quarterly results have rattled investor confidence.

There is some comfort on the demand side. Burkhard Weller of the Wellergruppe told Handelsblatt he is not aware of a single BMW customer switching to BYD, describing Chinese brands as niche players despite their combined nine percent market share. Weller dismissed the EV purchase subsidy as "complete nonsense." His dealer group, which generated €1.8 billion in revenue across 44 dealerships, sold around 53,000 vehicles in 2025 and is targeting 60,000 for 2026 at a 1.5 percent margin.

A separate controversy has stirred customer sentiment: BMW has been playing a Spider-Man advertisement on vehicle displays at startup for most models built from 2020 onward, part of a Marvel partnership tied to the cinema release of "Spider-Man: A Brand New Day." The move has drawn sharp criticism, particularly since BMW assured customers in 2024 that the car would remain an ad-free private space. While the incident is unlikely to materially affect operations, it highlights how sensitive buyers are to intrusions into the driving experience — a delicate matter at a moment when BMW is courting trust in its electric strategy through the Neue Klasse.