German luxury carmaker BMW reported a 35% drop in second-quarter pre-tax profit to €1.7 billion. The results were hit hard by a sharp slump in Chinese sales and falling consumer confidence across the Middle East. Overall revenue also declined by 7.9% to €31.3 billion, the company announced in a press release today.
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Financing Outperforms Manufacturing
In the core automotive segment, operating profit plummeted by more than 60% to €629 million. In contrast, operating profit in the financial services division rose by 9.5% to €647 million. Consequently, BMW earned more from vehicle financing and leasing than from manufacturing during the second quarter – an highly unusual shift for the automaker.
BMW’s biggest pain point remains China. The world’s largest automotive market, once a reliable engine of high margins for the Munich-based brand, has turned into a major vulnerability. Sales in the Chinese market are falling significantly as competition from domestic EV and tech-heavy carmakers intensifies. In the second quarter, BMW’s sales in China plummeted by nearly a third, following a profit forecast downgrade already issued in June.
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Rising Headwinds and Restructuring Costs
“The automotive industry faces rapidly escalating challenges—intense global competition, rising regional regulatory requirements, and the impacts of geopolitical conflicts will shape our business model in the coming years,” stated CEO Milan Nedeljković, emphasizing the urgent need to maintain efficiency and agility. CFO Walter Mertl added that global market competition has dramatically sharpened, underscoring the necessity of aggressive cost-cutting.
Despite these headwinds, the company confirmed its full-year outlook, which forecasts an automotive operating margin between 1% and 3%. In the second quarter, the margin compressed to 2.3%, down from 5.4% during the same period last year.
The Era of Outperforming Rivals Ends
For a long time, BMW weathered the broader industry crisis slightly better than its major German peers, Volkswagen and Mercedes-Benz. However, the tide is turning, and a quick turnaround is not on the horizon. Financial results in the second half of the year will be heavily weighed down by planned restructuring costs, and global market conditions remain too weak to expect a rapid recovery, news agency DPA warned.
Adding to the pressure, leading global news agencies reported on Wednesday that BMW plans to cut 8,000 jobs in Germany by the end of 2027. The headcount reduction is expected to be carried out through a voluntary redundancy program. Globally, BMW employs around 154,000 people, with 84,000 based in Germany.
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Source: ČTK
