BMW Q2 pretax profit drops 35% amid China slump and tariff drag

BMW Bayerische Motoren Werke AG reported a sharp decline in second-quarter pretax earnings on Thursday, with profit falling more than a third as the German premium carmaker grapples with collapsing demand in China, tariff headwinds, and foreign exchange pressures that have forced it to announce thousands of job cuts.

Earnings Under Pressure

The company posted quarterly pretax earnings of €1.7 billion, down roughly 35% year-over-year, though slightly ahead of analysts' consensus forecast of €1.6 billion. The operating margin in the core automotive business narrowed to 2.3%, compared with 5.4% a year earlier—far below BMW's strategic target range of 8-10%.investing+1

China retail sales plummeted 30.2% in the second quarter, dragging first-half deliveries in the country to 262,000 units. Group deliveries fell 4.9% year-over-year to approximately 591,000 vehicles in Q2, with first-half deliveries reaching 1.157 million units. CFO Walter Mertl cited multiple margin headwinds: tariffs reduced the automotive EBIT margin by 1.25 percentage points, depreciation linked to the BMW Brilliance Automotive joint venture cut another 1.2 points, and foreign exchange reduced quarterly EBIT by €400 million.investing

Job Cuts and Cost Measures

BMW confirmed it will eliminate around 8,000 positions by the end of 2027 under a voluntary redundancy program agreed with the works council. The program targets administrative and development roles, with production workers excluded. About 40,000 of BMW's roughly 85,000 permanent German employees will receive severance offers starting in October, with the measures expected to generate annual savings of approximately €1 billion from 2028.youtube+2

"The automotive industry is faced with rapidly escalating challenges—intense global competition, increasing regional regulatory requirements and the implications of geopolitical conflicts will shape our business model in the years ahead," CEO Milan Nedeljković said.reuters

Outlook Maintained Despite Headwinds

BMW confirmed its full-year 2026 guidance, which it had already cut in June to an automotive EBIT margin of 1-3%. The company expects automotive free cash flow to exceed €2.5 billion for the year and said it is accelerating cost-reduction initiatives, with effects expected to become visible from 2027. Despite the profit squeeze, BMW is continuing its €2 billion share buyback program, which management said is progressing ahead of schedule.finance.yahoo+2