Key Moments
- BMW cut its 2026 automotive EBIT margin guidance to 1-3% from 4-6%, triggering a share price drop of more than 7%.
- The automaker now expects group profit before tax to decline significantly and has reduced its automotive return on capital employed outlook to 1-5% from 6-10%.
- Jefferies lowered its BMW price target to €70 from €92 and cut its 2026 automotive EBIT margin estimate to 2% from 5.2%.
Guidance Cut Sends BMW Stock Lower
BMW shares fell more than 7% on Wednesday after the company issued one of its steepest profit warnings in recent years, sharply reducing its 2026 automotive profit margin outlook. The German automaker pointed to a worsening sales downturn in China and wider repercussions from the Middle East conflict.
On an investor call following an ad hoc statement earlier in the day, Chief Financial Officer Walter Mertl said BMW has lowered its full-year automotive earnings before interest and taxes (EBIT) margin corridor to 1-3%, down from a previous range of 4-6%.
The group now expects profit before tax to fall significantly, compared with an earlier view that anticipated only a moderate decline. In addition, the target range for automotive return on capital employed has been revised to 1-5%, from a prior 6-10% corridor.
Deliveries and Cash Flow Outlook
BMW also adjusted its delivery expectations for the automotive segment. The company now anticipates a slight decrease in unit deliveries compared with the prior year, having previously guided for volumes to be roughly in line with the previous year.
Despite the weaker earnings and volume outlook, BMW said it still expects automotive free cash flow to exceed €2.5 billion for the year.
China Market Deterioration
Mertl described a rapid deterioration in forecasts for the Chinese passenger car market. He said the China Passenger Car Association had revised its full-year outlook several times, moving from an expectation of a flat market in December 2025 to a projected 7.6% decline in early May, an 11.2% drop in the third week of May, and a 14.3% contraction in its most recent forecast published on Monday. According to Mertl, year-to-date sales through May were already down 19.4%.
BMW’s own performance in China has weakened materially. Mertl said the company’s sales in the country fell 10% year-on-year in the first quarter and were down 17.6% over the first five months of the year. He noted that BMW had previously maintained a relatively stable monthly sales rate of around 50,000 vehicles through 2025 and into 2026 before demand began to soften.
“We cannot operate in isolation of this market development,” Mertl said, pointing to intensifying competition in the region. He added that the broader Asia Pacific region recorded a double-digit sales decline in April and May.
Regional Trends and Macro Headwinds
Mertl said that more favorable trends in the United States and Europe, along with contributions from the iX3 model and lower Gen6 battery pack costs, would not be enough to counterbalance the volume and margin pressure from China and Asia Pacific.
He also highlighted the impact of the Middle East conflict, stating that it had driven energy prices higher and dampened consumer sentiment across global markets, with effects “beyond our original assumptions.”
Cost Measures and Strategic Actions
BMW indicated that it will step up previously announced structural and efficiency initiatives, following cost reductions of approximately €2.5 billion in 2025.
The company said the additional measures will generate a one-off negative impact in the second half of 2026, with the benefits expected to emerge in subsequent years. Chairman Milan Nedeljković said more information will be shared at a Capital Markets Day planned for the last week of September.
BMW maintained its dividend payout ratio target of 30-40% and confirmed its third share buyback program remains in place.
Analyst Reaction from Jefferies
Jefferies responded to the revised guidance by cutting its price target on BMW shares to €70 from €92, while reiterating a “hold” rating. The bank said the magnitude of the margin reduction suggested BMW “could be rethinking a global assembly business model still largely based on exporting ICE powertrain from Germany.”
Jefferies also lowered its 2026 automotive EBIT margin estimate for BMW to 2% from 5.2% and trimmed its 2026 revenue forecast by 3% to €128.70 billion.
Revised Guidance and Estimates Overview
| Metric | Previous Guidance/Estimate | New Guidance/Estimate |
|---|---|---|
| Automotive EBIT margin corridor (company) | 4-6% | 1-3% |
| Automotive return on capital employed (company) | 6-10% | 1-5% |
| Group profit before tax outlook (company) | Moderate decline expected | Significant decline expected |
| Automotive deliveries guidance (company) | At previous year’s level | Slight decrease vs previous year |
| Automotive free cash flow (company) | Expected to remain above €2.5 billion | |
| Jefferies price target for BMW | €92 | €70 |
| Jefferies 2026 automotive EBIT margin estimate | 5.2% | 2% |
| Jefferies 2026 revenue forecast | Not stated | €128.70 billion (3% lower than prior forecast) |
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