BMW China hit flags acute trade-war vulnerability

Bayerische Motoren Werke AG

17/06/2026 12:28

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Pierre Briancon

    BERLIN, June 17 (Reuters Breakingviews) - Milan Nedeljković has grasped the concept of kitchen-sinking. One month after taking over, the Serbia-born CEO of German luxury carmaker BMW BMWG.DE has shocked investors with a profit warning of unexpected magnitude. The company blames the sluggish Chinese market and the war in Iran for its underperformance. Rising trade tensions could make things worse.
A profit warning itself was not a surprise, after BMW had said last month that its China sales declined 10% in volume in the first quarter of the year. The only comfort was that the country's car market declined 17% overall. What was new, and shocking, on Wednesday was instead the size of the Nedeljković kitchen sink. Investors weren’t ready for the “significant decrease” in pre-tax profit flagged by the company’s announcement, and the reduction of the operating margin to a 1% to 3% range, compared with previous guidance of 4% to 6%.
Accelerated cost cuts are now on the agenda. The associated restructuring expenses will hurt the bottom line further in the second half of the year, before things get better — maybe. As European leaders are about to meet this week to try and adopt a common stance on trade with China, BMW has offered a timely sign of how vulnerable the company is to geopolitical winds.
As other German car makers, BMW has been hit by the fast rise of Chinese rivals since the pandemic — both in global export markets and on the upstart's home turf in the People's Republic. Whereas it sold more than 700,000 vehicles in China in 2023, its sales this year will barely top 500,000, according to analysts' forecasts gathered by Visible Alpha. More than 80% of these vehicles are produced locally, in two plants that BMW has presented as some of its most productive sites.
The restructuring that BMW now plans is likely to include drastic cuts in the company’s German manufacturing base, according to Jefferies analysts. The irony is that the group would then appear to double down on a Chinese market which, although it accounts for almost 30% of revenue, looks to be slowing down.
That would consolidate the group’s uncomfortable position in a scenario whereby EU leaders greenlight plans to be more aggressive on Chinese trade practices. As an exporter of Chinese-made vehicles to the EU, BMW is impacted by tariffs or other measure taken by Brussels. And as a European company operating in China, it may provide an easy target for Beijing’s possible retaliation. Nedeljković could soon acquire a good grasp of the concept of double jeopardy.
     
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CONTEXT NEWS
Shares in premium German automaker BMW fell around 7% on Tuesday after ‌it issued a profit warning that some analysts said could lead to capacity cuts in Europe.
BMW blamed protracted weakness in China, the world's biggest car market, and the impact of the Iran war on prices ​and customer sentiment.

(Editing by Liam Proud; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on BRIANCON/pierre.briancon@thomsonreuters.com))