BMW slashes 2026 profit forecast as China slump and Iran war bite, shares tumble 11.5%

The warning

BMW late on Tuesday lowered its 2026 outlook, telling investors that group profit before tax would fall significantly, the company defines that as a decline of more than 15%, after previously forecasting only a moderate drop. The automaker now expects an operating margin in its core automotive segment of 1% to 3%, down from a prior range of 4% to 6%. Return on capital employed is forecast between 1% and 5%, compared with the earlier 6% to 10% guidance. Chief executive Milan Nedeljković, who took over in May from Oliver Zipse, said the group would "significantly intensify and accelerate" cost-cutting measures, though the company disclosed no details beyond a warning that the steps would trigger a negative one-off charge in the second half of 2026.

We will adapt current structures and processes to the drastic downturn in market conditions.

China: the biggest market unravels

China remains the largest market for Germany's premium automakers, and the speed of the deterioration caught BMW off guard. Chief financial officer Walter Mertl said on an investor call that the company's March guidance had assumed stable monthly sales of roughly 50,000 vehicles in China through 2025 and into 2026. By the first quarter, volumes were already down 10% year-on-year, and the decline deepened in April and May, leaving sales through May 17.6% lower than a year earlier. BMW said market momentum in the US and Europe could not offset the drop in the world's biggest car market, and that it could not "operate in isolation of this situation."

Our March guidance was based on stable sales of roughly 50,000 vehicles a month in China through 2025 and into 2026.

Iran war and energy costs

The company said the impact from the Middle East conflict had turned out worse than initially expected, pointing to higher energy prices and deteriorating consumer sentiment around the world due to what it called a "lack of stability." The war, described in several reports as the US-Israeli war on Iran, has also hit pricing power and customer confidence in key export markets.

Cost-cutting and strategic overhaul

BMW said it would intensify cost-cutting measures, though it left open whether those would include job cuts. Jefferies analysts said the comments suggested the overhaul "will largely impact German operations and may address a global assembly footprint business model that is still largely centered on exporting ICE powertrain components from Germany." The warning comes just one month into Nedeljković's tenure, with the former head of production now tasked with overseeing the build-out of BMW's updated electric line-up, dubbed Neue Klasse, which cost billions of euros to develop.

The overhaul will largely impact German operations and may address a global assembly footprint business model that is still largely centered on exporting ICE powertrain components from Germany.

Market reaction

Shares in BMW fell as much as 11.5% in early Frankfurt trade on Wednesday, the biggest intraday decline in almost two years. The stock was already down around 27% this year through Tuesday's close. Analysts at Deutsche Bank and Jefferies both said the outlook cut was significantly larger than expected, and some suggested the warning signalled a broader strategic rethink for what had been Germany's most resilient premium automaker.