BMW’s Finance Arm Now Outearns Its Auto Division as China Sales Plunge 30%
Published on 07/30/2026 at 14:41 | Redaktion boerse-global.de
BMW’s second-quarter results, released Thursday, laid bare the severity of the crisis gripping its core business. Net profit tumbled 35% to €1.2 billion, revenue slipped from €34 billion to €31 billion, and the automotive segment’s EBIT margin collapsed to just 2.3% from 5.4% a year earlier. The operating profit from car-making cratered 60% to €629 million — a figure that was actually eclipsed by the financial services division, which contributed €647 million. For a company long defined by its engineering prowess, that inversion sent a stark signal about the depth of the downturn.
The culprit, overwhelmingly, is China. Deliveries there fell roughly 30% in the second quarter, compounding a 20.4% drop in the first half. Chief Executive Milan Nedeljkovic, presenting his first set of quarterly numbers since taking the helm, pointed to the rapid deterioration of the Chinese market as the primary driver of a result that, while within the lowered guidance range, he described as far from satisfactory. Gains in Europe (up 5.4%) and the U.S. (up 3.0%) helped cushion the blow but could not offset the scale of the Chinese retreat. U.S. tariffs added further pressure, shaving 1.25 percentage points off the first-half margin, according to reports.
Over the full six months, net income dropped to €2.9 billion from €4.0 billion a year earlier — a far cry from the €5.7 billion posted in 2024 and the €6.6 billion recorded in 2023. Worldwide deliveries fell 4.2% to 1,156,742 units.
8,000 Jobs to Go as Cost-Cutting Accelerates
Alongside the earnings release, BMW confirmed plans to eliminate 8,000 administrative positions worldwide by the end of 2027 — roughly 5% of its global workforce of 154,000. The cuts will fall disproportionately on Germany, where about 40,000 of the 84,000 domestic employees will receive severance offers starting in October. The reductions target administration, research and development, and management, while production workers are shielded. BMW has set aside a three-digit-million-euro provision this year for the restructuring. The company’s works council has already agreed to the plan, and no compulsory redundancies are expected.
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The job cuts are part of a broader effort to realign costs with a sharply lower earnings trajectory. BMW reiterated the drastically reduced full-year guidance it first issued in June: the EBIT margin for the automotive division is expected to land between 1% and 3%, down from the 8% to 10% range of the prior year. Pretax profit is forecast to decline significantly. The confirmation that second-quarter results landed within those already-reduced parameters provided a sliver of stability — the market had already priced in the weakness.
Analysts See a Floor, but Risks Remain
Jefferies maintained its “Hold” rating and €70 price target on Thursday, with analyst Philippe Houchois noting that the auto division’s operating profit met consensus expectations and that free cash flow came in stronger than anticipated — a stabilizing signal in an otherwise difficult environment.
Other analysts have turned more optimistic. HSBC upgraded BMW from “Hold” to “Buy” on July 22, setting a €71 price target and arguing that China-related risks were largely priced in after the stock’s year-to-date slide. Deutsche Bank Research reaffirmed its “Buy” rating with a €90 target on Tuesday, though it warned that margin pressure from Asian price competition remains a persistent headwind.
The stock traded at €60.74 on Thursday, up 0.90% on the day. It has recovered about 5.43% over the past seven trading sessions but remains just 7.70% above its 52-week low of €56.40, touched on July 24. The year-to-date decline stands at roughly 35%, and the shares trade about 24% below their 200-day moving average of €79.71.
Structural Shifts and Technical Headwinds
BMW is navigating a period of significant internal change. The supervisory board appointed Dorothea von Boxberg to the management board effective September 1, 2026, and the company completed the conversion of all non-voting preference shares into common voting shares on June 30, following a shareholder resolution on May 13. Despite the operational strain, BMW continued its share buyback program, acquiring 634,883 common shares between July 20 and July 26.
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On the operational front, the company faces a major recall: Germany’s Federal Motor Transport Authority flagged a starter relay defect affecting 744,234 vehicles across model series 2 through 7, X3 through X7, Z4, and i3 from the 2020–2026 model years, citing a potential fire risk. On a more positive note, BMW began series production of sixth-generation high-voltage batteries at its Woodruff, South Carolina plant, destined for the upcoming iX5 built at the neighboring Spartanburg facility.
A Glimmer of Hope: The Neue Klasse
One bright spot in the otherwise grim report is the Neue Klasse platform. BMW has already built more than 50,000 units of the all-electric iX3 SUV, and orders are approaching 100,000 vehicles. The company’s Capital Market Day, scheduled for September 29, is expected to provide deeper insight into the Neue Klasse strategy and how BMW plans to navigate the transition amid the current headwinds.
For now, the trajectory of BMW’s recovery hinges on two unknowns: whether China’s market can stabilize in the coming quarters, and whether the cost-cutting program can deliver a meaningful margin lift in the second half of the year.
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