BMW's car business faces possible loss after second profit warning for 2026

BMW has cut its profit forecast again, and this time the company says its car division could end 2026 with an operating loss. The German manufacturer now expects an operating margin of between -0.5% and 0.5% for its automotive division. Earlier in the year, it was forecasting between 1% and 3%.

Two problems are weighing on the business: fewer customers are buying BMWs in China, and the company is spending more than planned on restructuring. The timing is difficult. BMW is trying to reduce costs while also investing in new vehicles and technology to compete with Chinese manufacturers.

China is taking a bigger toll

BMW's vehicle deliveries in China dropped by 24.8% in the third quarter compared with the same period last year. Worldwide deliveries fell by 6.3% to 551,075 vehicles. China has been an important market for BMW's premium cars. But local manufacturers are giving buyers more options, particularly in electric vehicles and technology-led models. They are also competing on price.

BMW cannot rely on its established brand name alone to protect sales. Customers have more local brands to choose from, and those companies are putting pressure on the prices and market share of European manufacturers. The decline in China is showing up in BMW's financial results. Its automotive division recorded an operating profit of €901 million in the third quarter, down 39.7% year on year.

Cutting jobs will not immediately save money

BMW is also moving ahead with changes to its workforce and management structure. Its plans include around 8,000 job cuts in Germany.

Reducing the number of employees should lower costs over time, but the company first has to pay for the restructuring. BMW expects these expenses, together with other portfolio-related costs, to reduce its automotive operating margin by about 2.5 percentage points in 2026. This explains the difference between the company's underlying margin and the forecast it has given investors. BMW says the automotive margin would be above 2% if these additional costs were excluded. Once they are included, the division could be close to breaking even.

The new models still have to sell

BMW is putting considerable effort into its Neue Klasse range. The electric iX3 is one of the first models from this programme and is scheduled to reach Chinese customers in November. The launch matters because BMW needs new products that can compete with the vehicles Chinese manufacturers are already selling. It also needs to get the pricing right. Offering more technology and features is not enough if the cost of producing the vehicle leaves too little room for profit.

The latest results also show why BMW cannot treat the problem as a China only issue. Group profit before tax fell by 10.6% to €2.08 billion in the third quarter, while revenue declined by 5.8% to €30.45 billion. BMW Group is still making a profit, and the company expects automotive free cash flow to exceed €2.5 billion in 2026. The warning is specifically about the automotive division's operating margin, not the entire group.

For BMW, the immediate problem is that weaker vehicle sales and the cost of restructuring are arriving at the same time. The company needs its new models to sell, but it also needs to bring down the cost of running its existing business.