BMW Sets 3-5% Mid-Term Margin Goal in Recovery Plan After China Warning

German automaker BMW has outlined a new recovery plan targeting an automotive margin of 3% to 5% by 2028, following a profit warning in June prompted by weakening demand in China. The company's longer-term ambition is to restore its profitability margin to its historical range of 8% to 10% by the early 2030s.

The announcement, made during the company's capital markets day, comes after BMW's shares have fallen by more than a third over the past year to a multi-year low. The new targets represent a projected improvement from the company's most recent margin of 2.3%.

A Plan to Restore Profitability

The strategy is a direct response to the carmaker's third profit warning in just over three years. To achieve its goals, BMW has initiated a cost-cutting program that includes a redundancy plan expected to affect approximately 8,000 jobs in Germany, aligning it with similar measures by competitors Volkswagen and Mercedes-Benz.

Key pillars of the plan, according to an analyst note from Citi, include:

• Reducing product complexity and shortening development times.
• Lowering both fixed and variable costs.
• Rebalancing production capacity and deepening partnerships with suppliers.
• Optimizing its dealer network in China to an appropriate size.

Ad

BMW also confirmed it will invest about €2 billion in its German facilities for the next-generation 3 Series sedan and expand its high-performance M and Alpina ranges from 2027.

Market and Analyst Reaction

Following the announcement, BMW's shares rose 1.7% in early trading. However, analysts expressed caution regarding the new targets. Citi noted that consensus forecasts for 2028 are already at the top end of the new 3% to 5% range, suggesting the plan offers limited upside to current market expectations.

The bank's analysis indicated that the target implies little underlying improvement once adjusted for exceptional costs and accounting changes. Citi said the plan assumes "business as usual" and lacks a detailed discussion of structural industry risks or significant changes to capital allocation.

Analysts at Citi believe the longer-term 8% to 10% margin target is likely to be disregarded by investors for the time being, and that caution on the stock will persist given the limited potential for earnings-per-share growth through 2028.