BMW’s Balance Sheet Strength Clashes With Job Cuts and Rating Warning After Margin Slash
20.06.2026 - 05:23:06 | boerse-global.de
The profit warning BMW issued mid?week has set off a chain reaction that reaches far beyond the trading floor. Chief executive Milan Nedeljkovic is now preparing the workforce for cuts of up to 5% – equivalent to roughly 7,500 positions – as the company scrambles to contain the damage from a dramatically weakened outlook for its automotive division. The group’s works council confirmed on Friday that negotiations over headcount reductions are already under way.
At the heart of the crisis is the decision to slash the EBIT margin forecast for the car business to a range of just 1% to 3% – half the level analysts had previously expected. The primary culprit is China, where an intensifying price war, especially from local electric?vehicle makers, is crushing profitability. High energy costs and weak global consumer sentiment have compounded the problem. While the US and European markets are performing slightly better, they cannot offset the Asian shortfall.
The margin cut prompted an immediate response from analysts and rating agencies. UBS’s Patrick Hummel cut his price target on the stock from €88 to €70 and lowered his earnings?per?share estimates by as much as 44%, citing little hope of a meaningful recovery in China over the next two years. Moody’s also weighed in, revising BMW’s credit outlook from “stable” to “negative” while affirming the long?term A2 rating. The shift in tone from the agency underscores the growing concern over the group’s earnings trajectory.
Not all analysts are convinced the sell?off is justified. Goldman Sachs’ Christian Frenes argues that BMW’s net cash pile now exceeds its entire market capitalisation, which he sees as a floor for the shares. JPMorgan, on the other hand, views the situation as a wake?up call for European premium manufacturers, warning they may no longer be price?competitive in China.
Should investors sell immediately? Or is it worth buying BMW?
The stock closed Friday at €60.38, after trading marginally higher at €60.26 earlier in the session. That leaves the shares down roughly 37% since the start of the year and 28% below their 200?day moving average. The relative strength index has sunk to 19.4, deep in oversold territory. Technical analysts note that such readings often precede bounces, provided no fresh negative headlines emerge.
Competitive pressure is also mounting from an unexpected direction. BYD intends to launch its “Great Tang” electric SUV in Europe at around €31,000 from the end of 2026 – a price point that puts structural pressure on premium brands like BMW. On the regulatory front, reports that the EU is planning tariffs on Chinese plug?in hybrids have provided a tentative tailwind for the stock, but the fundamental headwinds remain formidable.
Amid the gloom, there is one notable bright spot. BMW has pulled forward the order start for the new i3, the first model built on its “Neue Klasse” electric?vehicle platform, citing unexpectedly high pre?order demand. The company is also converting its Leipzig plant over the summer to ramp up production. The i3’s early success offers a glimpse of a turnaround, but it lands in a market that is punishing premium pricing.
BMW at a turning point? This analysis reveals what investors need to know now.
Nedeljkovic is counting on the “Next Level Performance” efficiency programme to stabilise margins at the upper end of the 1%–3% range. The outcome of the job?cut negotiations with the works council will be critical. For now, the dividend appears safe, supported by expectations of a strong free cash flow in the billions. The real test comes on 30 July, when BMW publishes its half?year report and must present concrete steps to arrest the margin decline in the second half of the year.
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