BMW is implementing significant cost-cutting measures, including plans to reduce its global workforce by up to 5% by the end of 2026, which translates to roughly 7,700 positions. This reduction will largely occur through natural attrition rather than compulsory redundancies, with negotiations already underway with the works council. The move follows BMW's third profit warning in as many years, prompting CEO Milan Nedeljkovic to intensify structural and efficiency measures.
This workforce reduction is part of a broader effort to address deteriorating profitability, especially in China where competition from local electric vehicle manufacturers like BYD, Nio, and Xiaomi has intensified. The company also faces challenges from elevated energy costs and the ongoing Middle East conflict. JPMorgan analyst Jose Asumendi termed BMW's profit warning a "wake-up call for the auto industry," emphasizing the need for BMW to re-evaluate its compact-segment strategy in China where European premium brands are struggling with price competitiveness.
The profit warning led Moody's to revise BMW's A2 long-term rating outlook from stable to negative. UBS cut its price target from €88 to €70, maintaining a "Neutral" stance, and Goldman Sachs similarly reduced its target. BMW has also drastically lowered its EBIT margin target for the automotive segment to between 1% and 3%, down from the previous 4% to 6% range, and free cash flow is now expected to exceed only €2.5 billion, a significant drop from the earlier forecast of over €4.5 billion. The company anticipates a "significant decline" in pre-tax profit for the full year and expects one-off charges in the second half of 2026 due to these measures, with savings materializing in subsequent years.
Despite the immediate challenges, BMW is attempting to refocus on its electric future, with the company pulling forward the order date for new electric vehicles. However, technical analysis showing the stock is oversold with a relative strength index of 20.5, while historically signaling a potential rebound, cannot alone fix the fundamental problems. The full half-year results are expected on July 30, which will likely provide more clarity on the financial impact of these issues.
