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BMW Cuts 2026 Outlook Over China Downturn, Middle East Headwinds; Shares Fall

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BMW Cuts 2026 Outlook Over China Downturn, Middle East Headwinds; Shares Fall

Shares of BMW (BMW.F) dropped in early Wednesday trading after the German luxury carmaker slashed its 2026 profit outlook, citing the impact of the Middle East conflict, a downturn in the key Chinese market, and a one-off effect from its planned cost-cutting initiative.

BMW now expects a "significant" year-over-year decline in group pre-tax profit for full-year 2026. It previously projected a "moderate" drop in group profit before tax.

Following the announcement, the stock dropped as much as 6% in early morning trading in Frankfurt before recovering some losses.

Like other automakers, BMW is feeling the heat from an accelerated downturn in China, especially for non-electric vehicles, and intensified pricing competition in the country and across the Asia-Pacific region. "The BMW Group cannot operate in isolation of this market development. Positive sales volume development in Europe and the US cannot offset the decline in sales in China and the Asia-Pacific region," the company said.

The Middle East impact has also proved to be worse than initially expected, the company said, noting the elevated fuel prices and negative consumer sentiment due to the "lack of stability."

BMW lowered its expectations for EBIT margin in the automotive segment to a range of 1% to 3%, compared with the previous projections of 4% to 6%. It also expects to record a "slight" drop in automotive deliveries in 2026, having previously expected deliveries to remain at par with the prior year.

To mitigate the impact of "the drastic downturn in market conditions," the company plans to "significantly intensify and accelerate" its cost-cutting measures, Milan Nedeljković, chairman of the board of management, said. The company expects a one-time negative impact on its second-half 2026 earnings from these measures.

On the other hand, the company clarified that its dividend policy and the ongoing stock repurchase program remain unchanged.

"Given the structural headwinds facing the group, including intense competitive pressure, particularly on pricing, a fixed cost base that remains too high, tariffs and persistent weakness in China, we are not confident in BMW's ability to achieve its long-term strategic Automotive EBIT margin target of 8-10%," AlphaValue/Baader Europe said in a quick-take note. "While cost-cutting initiatives and efficiency measures should provide some support, we do not expect them to fully offset these pressures, especially given the limited contribution expected from price/mix and volume growth going forward."

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