BMW’s China Strategy Comes Due at €60 a Share

RBC Capital Markets cut its BMW price target to €60 from €62 on August 14, a whisker from where the ordinary shares already trade. Analyst Tom Narayan kept a Sector Perform rating and pointed to weak Chinese deliveries plus tougher competition in Europe. Automotive EBIT margin in the second quarter was 2.3% after China deliveries fell 30.2%.

The cut lands on a company that changed chief executives on May 14 and, five weeks later, tore up its 2026 profit guide. Cost cuts are in motion. The China profit engine that funded the last decade is the part that broke.

BMW Now Guides a 1-3% Automotive Margin

On June 16 the board cut 2026 auto margin guidance to a 1-3% corridor, from 4-6%, and switched group profit before tax from a moderate decline to a significant one. Automotive return on capital is now 1-5%, down from 6-10%. Deliveries, once seen flat on 2025’s 2.46 million cars, are guided slightly lower. A one-time charge for faster restructuring will hit in the second half. Free cash flow in the car business is still seen above €2.5 billion, and the 30-40% dividend payout plus the buyback were left intact.

The July 30 half-year release confirmed that print. Group pre-tax profit in the second quarter was €1,697 million, down 35.1%, on revenue of €31,259 million, down 7.9%. Automotive EBIT was €629 million, down 60.7% from €1,602 million. Segment free cash flow was €513 million, down 73.4%. For the first six months the group earned €4,045 million before tax, down 29.4%, on revenue of €62,266 million.

CFO Walter Mertl said the firm banked €2.5 billion of cost saves last year and is now speeding that work up, with more structural cuts on top. Research spending in the first half fell 7.6% to €3,714 million. Capital expenditure dropped 30.5% to €1,900 million. Last year still produced €10.2 billion of group pre-tax profit on €133.5 billion of revenue, with 154,540 staff at year end. The 2026 car margin band is a different business.

Four Weeks After the Handover, Guidance Collapsed

At the close of the May 13 annual meeting, Oliver Zipse handed the chair to Nedeljković. Zipse left after 35 years at the company and seven as chairman, a run the supervisory board dates to August 2019. Milan Nedeljković, 57, had run production since 2019. He joined as a trainee in 1993, and his new contract runs through 2031. Dr. Raymond Wittmann, 47, took the production seat the next day.

Zipse told shareholders it had been a great honour to lead the group for seven years. Supervisory board chairman Dr. Nicolas Peter said Zipse’s name would stay tied to Neue Klasse. Nedeljković’s own line at the meeting was that profitability and speed are crucial. Five weeks later he had to say the rest out loud.

We have strong product momentum: With the NEUE KLASSE, we will put the strongest BMW portfolio in history on the roads over the next two years. At the same time, we will adapt our current structures and processes to the drastic downturn in market conditions. It is our entrepreneurial responsibility, therefore, to significantly intensify and accelerate our ongoing measures. It’s all about speed and efficiency.

Milan Nedeljković, Chairman of the Board of Management, BMW AG, June 16 2026 guidance statement

The company reached a deal with the works council on a workforce programme that includes voluntary severance. Separate reporting has put the German job reduction at around 8,000 roles by the end of 2027. Bosch has talked about cutting up to 22,000 jobs worldwide and ZF 14,000 in Germany. German auto employment stood at 691,500 on June 30, down 42,300 or 5.8% year on year, the lowest since 2005, according to the figures carried in the same industry tally.

Shenyang Was Supposed to Stabilise China This Year

Zipse’s last speech as chairman still treated China as a problem that 2025 had already boxed in. He said the aim last year was to stabilise sales in the world’s largest car market, and that BMW had done so, then claimed the brand beat a shrinking total market in the first quarter of 2026. The recipe he left on the table was local relevance, speed, and software: plants in Shenyang, a new battery joint venture with BMW Brilliance Automotive, and work with Momenta, DeepSeek, and Alibaba Banma. The slogan was “In China. For China. With China.”

April’s Auto China show in Beijing put long-wheelbase versions of the iX3 and the i3, plus a new 7 Series with Neue Klasse tech, in front of local buyers. Zipse called those cars more consistently tailored to China than anything BMW had built before. Reuters wrote in mid-July that the firm was trying to revive China after two years of falling sales, and that the local electric race may have moved on without it. BMW’s own 2024 China deliveries were already down 13.4%.

THE CHINA TURN

1. Financial year 2025: Zipse tells the AGM that China sales were stabilised and that BMW beat a weaker total market in Q1 2026.
2. April 2026: Long-wheelbase iX3 and i3, plus a Neue Klasse 7 Series, premiere in Beijing as the China-specific product answer.
3. June 16, 2026: The board warns that the China slump accelerated in Q2, above all for non-electric cars, and that Europe and the US cannot offset Asia-Pacific.
4. Q2 2026: China-region deliveries fall to 117,815, down 30.2%; the first-half tally is 261,773, down 20.4%.

Group deliveries in the second quarter were 590,947, down 4.9%. Europe rose 7.6% in the quarter and 5.4% in the half; the United States rose 11.9% and 3.9%. That split is the opposite of the decade when China carried premium margins. Discounting combustion cars in China is not reversing the unit drop, and BMW’s own electric volumes there remain a rounding error beside local brands that still command the price.

Volkswagen’s China deliveries fell 37% in the same quarter, Bloomberg reported, so Munich is not uniquely unlucky. BMW still cannot isolate itself, which is exactly what the June note said. The China Passenger Car Association had already cut its full-year market forecast again the Monday before that warning. A Middle East conflict was named as a second drag, through energy costs and weaker consumer mood, but the unit hole is in Shenyang’s sales region.

Why BMW’s Automotive Margin Fell to 2.3%

BMW printed a 2.3% automotive EBIT margin in the second quarter, down from 5.4% a year earlier. Import duties in the United States and the EU took about 1.25 percentage points off that figure, and extra depreciation on BMW Brilliance Automotive assets from the purchase-price allocation took about 1.2 points, the company said on July 30. Add those two items back and the margin still trails last year’s 5.4%.

THE 2.3% MARGIN

• Reported auto margin: 2.3% in Q2 2026, against 5.4% in Q2 2025 and 3.6% for the first half.
• Duty drag: About 1.25 points from US and EU import-duty costs in the quarter.
• Brilliance write-down: About 1.2 points of extra depreciation on BBA assets from the old purchase-price allocation.
• What is left: Even after those two items, the year-on-year margin gap is not closed, and auto EBIT in euros is still down 60.7%.

Zipse had already told the May meeting that tariffs alone took about 1.5 points off the automotive margin in 2025, and that without them earnings would have been higher year on year. His policy line did not move. “Tariffs and protectionism ultimately hurt everyone,” he said, covering both EU duties on fully electric cars imported from China and the EU-US tariff fight. That is a hard position for a company that still builds cars in Shenyang and Spartanburg and sells them across those borders.

The same speech defended combustion engines and plug-in hybrids beside battery cars, and attacked the EU’s 2035 CO₂ rules for ignoring how markets differ. BMW, he said, beat the EU fleet target again in 2025. Independent monitors still have the group on the right side of the 2025-2027 test: the BMW pool 2g under its CO2 target for January 2025 through June 2026, per the ICCT, while the Volkswagen pool was 7 g/km the wrong side of its line.

Debrecen Built 50,000 iX3s in Nine Months

The industrial answer is running, just not yet in the market that broke the quarter. Plant Debrecen in Hungary, the first Neue Klasse factory, built its 50,000th iX3 in late July, about nine months after series production began in late 2025, which BMW calls the fastest ramp of any new plant in the group. A second shift started in February 2026, ahead of plan, because orders were already there. The July 30 release said the iX3 is on track for 100,000 orders since sales began, and that around one in three all-electric BMWs ordered in Europe has been an iX3.

Europe’s battery-car mix is the clean side of the ledger. In the second quarter the group delivered 81,500 fully electric cars in Europe, up 37.9%, so 31.3% of European deliveries were battery-electric against 24.4% a year earlier. Globally, 116,807 fully electric cars went out in the quarter, up 5.2%. MINI had a strong half, with 149,535 cars, up 11.7%, and 36.9% of those fully electric. The product is landing where the grid, the dealers, and the sticker price already work.

• Debrecen, Hungary: First Neue Klasse plant; 50,000 iX3s in nine months; two shifts from February; the new electric iX3 built in Hungary is the car BMW can sell in Europe and, unlike the old China-made iX3, take into the United States.
• Munich: Series production of the i3, the second Neue Klasse model, began at the headquarters plant on August 6 after about €650 million of rework; BMW has said the i3 start cuts manufacturing cost 10%, and from 2027 Munich will build only battery cars.
• Shenyang: Long-wheelbase iX3 and i3 for China, shown in Beijing in April, with trial Neue Klasse production flagged at year-end 2025; those cars are not yet the volume that would fill a 30.2% hole.
• San Luis Potosí, Mexico: Converted for Neue Klasse vehicles and high-voltage batteries, with cumulative investment of about €1.72 billion; standard-wheelbase iX3 output is slated for 2027.

Zipse put more than 50,000 iX3 pre-orders on the Europe book as of May 13, with a WLTP range of 805 km on the long figure (the press sheet for the iX3 50 xDrive lists 678-805 km). He said engineers drove Debrecen to Munich, 1,007 km, without charging. The i3 is claimed at up to 900 km WLTP and 400 km of range from a 10-minute charge on the 800-volt sixth-generation drive. More than 40 new and updated models are due by 2027, every one drawing on Neue Klasse tech. Demand, not the Hungarian line, has been the constraint so far, which is why a second shift arrived early. The open risk is the opposite in China: the local cars are late relative to BYD, Nio, and the rest, and the European cars cannot be the China answer.

Chinese PHEVs Took 28% of Europe’s Plug-in Market

Home turf is no longer a closed shop. The German auto industry association VDA has Chinese manufacturers at nearly 10% of the European market, up from 0.5% in 2021. Rhodium Group, in an April study, put China-made cars at 6.4% of EU sales for the prior full year and 9.3% in December, a different cut that counts Western brands built in China as well as Chinese badges. Volkswagen chief Oliver Blume in late July urged Brussels to move fast on extra duties for Chinese plug-in hybrids after those cars took 28% of European PHEV sales, Automotive News reported. Handelsblatt has said the Commission is looking at extending the BEV levies, which already run as high as 35.3% for some Chinese makers, onto PHEVs.

Dataforce analyst Matthias Schmidt told The Guardian in early August that Chinese firms are hitting a wall on pure electrics in Europe and will push PHEVs for the next year because hybrids sit outside the extra BEV tariffs. BMW has spent two years arguing the other way. A PHEV tariff would help on the dealer lot in Munich and Stuttgart. It would also sit badly with a company that still talks about open markets and that designed China-built electrics for export until Hungary came on stream.

Industry-wide auto profits fell 12% in the second quarter on a 1.2% revenue drop, a reminder that BMW is not the only premium house losing pricing power. The electric M Concept Neue Klasse shown at Monterey Car Week in mid-August is the halo, not the P&L. Spartanburg remains BMW’s largest plant and the reason the brand is still the largest automotive exporter by value from the United States, Zipse told the meeting. That US factory is also why Washington’s duties show up as 1.25 points on the Munich margin.

Ordinary Shares Have Slipped Below the €60 Target

RBC’s new target is no longer a floor sitting comfortably under the tape. The shares closed the week of the note around €59.60, 5.7% above the 52-week low of €56.40. By the following Monday they had traded near €58.24-€58.28, a few percent above that low, after a year-to-date drop in the high thirties. The stock was about 24% below its 200-day moving average at the time of the note and had slipped under a 50-day average that itself was near €60. Mean consensus on MarketScreener around August 14 was still outperform, with an average target well above RBC’s number, so Narayan is the skeptic on the sheet, not the house view.

Second-quarter earnings per share were €2.05, down from €2.85. That is the equity translation of a 2.3% car margin and a China book down by almost a third. The H2 restructuring charge has not printed yet. The long-wheelbase China cars have not reached volume. Munich only started the i3 on August 6. Those three facts are why a 1-3% full-year margin band can still get worse before Debrecen, Munich, and Shenyang show up in the operating line together.

Disclaimer: This article is news reporting and analysis of BMW’s public filings, management remarks, and third-party research, and it is for information only. It is not investment advice, a recommendation to buy or sell BMW shares or any other security, and it is not a forecast of returns. Readers should consult a qualified financial adviser or licensed broker before making any investment decision. Figures, ratings, and operating statuses are those given by the cited sources as of August 20, 2026, and they can change with later deliveries, guidance, or market prices.