BMW shares skid on profit warning. The German experience in China keeps getting worse.

By Steve Goldstein

BMW issued a profit warning, citing Chinese volume struggles.

BMW shares slumped on Tuesday, falling 7%, after the German automaker said volumes in China were below expectations and that the U.S.-European Union tariff agreement has yet to materialize..

BMW (XE:BMW) primarily blamed China, saying that not only are volumes disappointing, but that reduced commissions from Chinese banks to dealerships are hurting profitability.

China's domestic car industry has thrived in recent years with automakers including BYD (HK:1211) and Chery leapfrogging foreign rivals with electric offerings.

At the same time, the agreed European Union tariff deal with the U.S. has not been implemented, which means U.S. tariffs on European imports stay at 27.5% instead of falling to 15%.

Combined, that means automotive margins for BMW will be between 5% and 6% for the year, vs. its previous guidance of between 5% and 7%.

Analysts at Bernstein say the new margin guidance actually fits with market expectations, of 5.6%, but that the China news was disappointing

"We like much of what BMW does," added Citi analysts led by Harald Hendrikse. "Strategic consistency and vision. Consistent execution. However, we have been worried about BMW's over-exposure to China, and its seeming lack of concern over such."

Over the last 12 months, China was BMW's largest market by revenue, according to FactSet data, at 22% vs. 19% from the U.S.

Other European automakers including Porsche (XE:P911), Volkswagen (XE:VOW3) and Renault (FR:RNO) also traded lower.

-Steve Goldstein

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10-08-25 0435ET