BMW cut its full-year 2026 profit outlook on Tuesday, blaming an accelerating decline in the Chinese automotive market and the widening economic fallout from the conflict in the Middle East.
The company said its automotive segment EBIT margin is now expected to land in a corridor of 1% to 3%, down from prior guidance of 4% to 6%. Group profit before tax is now projected to fall at a significant rate compared with the previous year, a steeper deterioration than the moderate decline BMW had previously forecast. The company also revised its delivery outlook to a slight decrease versus last year, having previously guided for volumes at roughly the same level.
BMW said the downturn in China's passenger car market intensified in the second quarter, with non-electric vehicles hit particularly hard. Sales gains recorded in Europe and the United States fell well short of making up for the losses BMW suffered across China and the rest of the Asia-Pacific region, the company said. Higher energy costs tied to the Middle East conflict are adding pressure to BMW's cost base while also undermining the confidence of buyers globally, the automaker said.
Beyond the pressure on its operating business, BMW said it would accelerate and intensify ongoing cost reduction efforts through additional structural and efficiency measures. Those steps will carry a one-time negative impact on earnings in the second half of 2026.
"We will adapt our current structures and processes to the drastic downturn in market conditions," BMW Board of Management Chairman Milan Nedeljković said in a statement. "It is our entrepreneurial responsibility, therefore, to significantly intensify and accelerate our ongoing measures."
BMW stock fell 6.5% on Wednesday. Shares of fellow German automakers Volkswagen and Mercedes-Benz also declined following the announcement.
BMW's troubles in China are not new. The company reported a 10% drop in China deliveries in the first quarter of 2026, against a total Chinese market that contracted 17.5% over the same period. First-quarter group pretax profit came in at €2.35 billion, roughly 25% below the year-earlier figure, with a bruising pricing environment in China and U.S. tariffs both contributing to the decline. The automotive segment's EBIT margin reached 5.0% in the quarter, within the company's then-current full-year guidance range.
BMW said its half-year report will be published on July 30, 2026. The company said its free cash flow in the automotive segment is expected to remain above €2.5 billion, and it kept its dividend payout ratio of 30% to 40% of net income unchanged.