Company Reports

BMW’s strategy is centered on three elements: electric, digital, and circularity. The company moved relatively early to invest in electric powertrain technology, contributing to a higher new electric vehicle penetration rate of 26% versus 21% for Mercedes and 19% for Audi. Its digital strategy focuses on software-defined vehicles and leadership in automated driving, with BMW becoming the first original equipment manufacturer in Germany to receive DCAS approval in 2025 for Level 2+ automated driving systems, which will become standard across the Neue Klasse platform starting with the iX3. For circularity, the firm aims to increase its use of recycled materials in production to at least 25% by 2030, particularly in battery materials. It is investing in hydrogen-powered vehicles as another way to increase the penetration of clean transport, with its belief that hydrogen better replicates the current internal combustion engine user experience with short fill-ups using existing petrol station infrastructure.

BMW reported second-quarter automotive EBIT margin of 2.3%, within its recently lowered 1%-3% guidance, although 310 basis points below last year. China remained the principal drag on earnings, outweighing resilient demand in Europe and North America as well as continued cost-efficiency gains.

BMW cut its 2026 outlook for automotive EBIT margin to 1%-3% from 4%-6% and expects free cash flow above EUR 2.5 billion. The downgrade reflects accelerating weakness in China, energy cost headwinds, and second-half restructuring charges. The shares dropped after the June 16 announcement.

BMW’s strategy is centered on three elements: electric, digital, and circularity. The company moved relatively early to invest in electric powertrain technology, contributing to a higher new electric vehicle penetration rate of 26% versus 21% for Mercedes and 19% for Audi. Its digital strategy focuses on software-defined vehicles and leadership in automated driving, with BMW becoming the first original equipment manufacturer in Germany to receive DCAS approval in 2025 for Level 2+ automated driving systems, which will become standard across the Neue Klasse platform starting with the iX3. For circularity, the firm aims to increase its use of recycled materials in production to at least 25% by 2030, particularly in battery materials. It is investing in hydrogen-powered vehicles as another way to increase the penetration of clean transport, with its belief that hydrogen better replicates the current internal combustion engine user experience with short fill-ups using existing petrol station infrastructure.

BMW’s strategy is centered on three elements: electric, digital, and circularity. The company moved relatively early to invest in electric powertrain technology, contributing to a higher new electric vehicle penetration rate of 26% versus 21% for Mercedes and 19% for Audi. Its digital strategy focuses on software-defined vehicles and leadership in automated driving, with BMW becoming the first OEM in Germany to receive DCAS approval in 2025 for Level 2+ automated driving systems, which will become standard across the Neue Klasse platform starting with the iX3. For circularity, the firm aims to increase its use of recycled materials in production to at least 25% by 2030, particularly in battery materials. Additionally, it is investing in hydrogen-powered vehicles as another way to increase the penetration of clean transport, with its belief that hydrogen better replicates the current internal combustion engine user experience with short fill-ups using existing petrol station infrastructure.

BMW reported a first-quarter automotive EBIT margin of 5%, within guidance and ahead of company-compiled consensus. Further cost-efficiency gains kept operating profitability in line with full-year 2025 levels despite tariffs and volume headwinds. Automotive free cash flow grew 88% year over year.

BMW's 2025 results came within guidance, although fourth-quarter automotive EBIT margin of 3.7% fell short of the 5%-7% full-year target. Automotive free cash flow exceeded expectations at EUR 3.2 billion. Despite foreseeing stable deliveries, management expects some margin deterioration in 2026.

The European Union has softened its emission-reduction targets for the auto sector and initiated support for electric vehicle demand. By 2035, carmakers need to reduce emissions by 90%, down from the previous 100% target. For vans, the CO2 reduction target has been cut to 40% from 50% by 2030.

BMW has announced its succession plan for the retirement of the current CEO and chairman of the board. Incoming Chairman Milan Nedeljković's résumé shares many similarities with that of outgoing Chairman Oliver Zipse.

Automotive revenue grew 2% in the third quarter (up 6% at constant currency), supported by volume growth of 9% off a low base created by the brake recall. Automotive EBIT margin of 5.2% fell within the full-year guidance range. One in three orders in Europe was for the Neue Klasse iX3.

BMW's solid third-quarter sales momentum in Europe, the US, and the rest of the world was overshadowed by a downgrade to full-year guidance for auto operating profit margin and free cash flow, attributable to weaker-than-expected performance in China and a higher-than-expected US tariff burden.

BMW’s strategy is centered on three elements—electric, digital, and circularity. BMW took the decision relatively early to begin investing in electric powertrain technology. This is reflected in its higher new electric vehicle penetration rate of 26% versus peers Mercedes at 20% and Audi at 17%. Its digital strategy is currently dominated by its leadership in automated driving, with level 3 automated driving (hands-free steering) being available in its 7 Series vehicles in 2024. Level 4 (driver attention no longer needed under regular driving conditions) is currently being tested. For circularity, the firm aims to increase its use of recycled materials in production in the future, particularly battery materials. In addition, it is investing in hydrogen-powered vehicles as another way to increase the penetration of clean transport, with its belief that hydrogen better replicates the current internal combustion engine user experience with short fill-ups using existing petrol station infrastructure.

BMW’s strategy is centered on three elements—electric, digital, and circularity. BMW took the decision relatively early to begin investing in electric powertrain technology. This is reflected in its higher new electric vehicle penetration rate of 26% versus peers Mercedes at 20% and Audi at 17%. Its digital strategy is currently dominated by its leadership in automated driving, with level 3 automated driving (hands-free steering) being available in its 7 Series vehicles in 2024. Level 4 (driver attention no longer needed under regular driving conditions) is currently being tested. For circularity, the firm aims to increase its use of recycled materials in production in the future, particularly battery materials. In addition, it is investing in hydrogen-powered vehicles as another way to increase the penetration of clean transport, with its belief that hydrogen better replicates the current internal combustion engine user experience with short fill-ups using existing petrol station infrastructure.

Full-year guidance remains unchanged, with second-quarter automotive EBIT margin of 5.4% meeting full-year margin guidance of between 5% and 7%, despite incurring the highest US tariff burden, which equates to 2% of EBIT.

BMW’s strategy is centered on three elements—electric, digital, and circularity. BMW took the decision relatively early to begin investing in electric powertrain technology. This is reflected in its higher new electric vehicle penetration rate of 26% versus peers Mercedes at 20% and Audi at 17%. Its digital strategy is currently dominated by its leadership in automated driving with level 3 automated driving (hands-free steering) being available in its 7 Series vehicles in 2024. Level 4 (driver attention no longer needed under regular driving conditions) is currently being tested. For circularity, the firm aims to increase its use of recycled materials in production in future, particularly battery materials. In addition, it is investing in hydrogen-powered vehicles as another way to increase the penetration of clean transport with its belief that hydrogen better replicates the current internal combustion engine user experience with short fill-ups using existing petrol station infrastructure.

The European Union and the US have reached a trade deal, setting the baseline tariff rate at 15% for imports from the EU, including autos.

The Neue Klasse was revealed, with an unmistakably BMW design, battery capabilities to dispel range and charging speed anxiety, and a technology stack to match that of Chinese carmakers. The 8%-10% automotive EBIT margin corridor is expected to be realized by 2027 or 2028.

BMW expects a second-quarter automotive EBIT margin of between 5% and 7%, despite it being the heaviest hit by tariffs. Second-quarter sales volume grew 0.4%, up 6.6% excluding China. Sales volumes in Europe increased by 9.9%, well ahead of the market. Mini sales volumes grew 33%, up 49% in China.

The auto segment delivered a 6.9% margin at the top end of guidance, or 8.1% excluding the amortization of the BBA purchase price allocation. The European antisubsidy tariff on Chinese-made BEVs added low to three-digit million euro costs. Guidance is unchanged, including the 25% US auto tariff.

On April 2, US President Trump reaffirmed the implementation of a 25% worldwide import tariff on all automobiles and automobile parts imported into the US, with the exceptions related to the United States-Mexico-Canada Agreement, as initially announced on March 26. The automobile industry will not be subject to the reciprocal tariffs announced on April 2. Thus, we reaffirm our estimate of a negative impact of between 20% and 30% on our fair value estimates for no-moat auto original equipment manufacturers resulting from these tariffs. Despite the downward revisions under this scenario, we continue to believe that there is a sufficient margin of safety at current prices, as shares trade at a significant discount to our valuations. BMW and Mercedes export approximately 50% of their US production, which may be affected by retaliatory tariffs, possibly increasing the negative impact on our fair values.