BMW lowers profit forecast amid restructuring and Chinese market challenges

BMW joins Mercedes-Benz, which recently revised its profit outlook downwards, highlighting difficulties faced by Western automakers in keeping pace with lower-cost domestic competitors in China. This has resulted in reduced sales in China and a subsequent increase in exports to Europe.

The company now anticipates a profit margin of between -0.5% and 0.5% for the year, a significant drop from an earlier projection of 4-6%. This revision reflects fourth-quarter costs associated with the restructuring and job cuts.

On Wednesday, BMW reported an 11% decrease in third-quarter pre-tax earnings, reaching €2.1 billion (£1.75 billion).

Sales in China have declined by 22% during the first nine months of the year, a trend BMW attributes to a broader market downturn.

“Current developments in our industry call for decisiveness and swift implementation. We will therefore specifically intensify and accelerate structural measures,” stated chief executive Milan Nedeljković.

Nedeljković emphasized that China “remains a key focus,” with the launch of the iX3 marking the beginning of BMW’s Neue Klasse model revitalization this month.

Similar to Volkswagen, BMW is facing restructuring costs driven by a rapidly evolving market. The company is writing off assets from previous vehicle and technology generations and factoring in the costs associated with the redundancy program, spurred by the swift introduction of its new electric vehicle generation.

The operating margin in BMW’s core automotive business narrowed to 3.4%, surpassing analyst expectations of 3.1% but falling from 5.2% in the previous year. Excluding restructuring charges, the margin would be above 2%, aligning with prior forecasts.

BMW plans to accelerate the reduction of management functions as part of its restructuring efforts. Revenue decreased by 6% to €30.4 billion in the third quarter, impacted by the decline in Chinese sales.

While Mercedes-Benz also reported lower profits in the third quarter, Porsche experienced a slight rebound following substantial charges last year as it reworks its model lineup and reduces its presence in China.