BMW Group Lowers Financial Outlook Due to Weak Sales in China and Tariff Costs

According to Bloomberg, affected by weak sales in the Chinese market and tariff costs, the German luxury car manufacturer BMW AG has lowered its financial outlook, highlighting the challenges faced by Germany's export-dependent automotive industry.

iX3; Image source: BMW Group

BMW Group currently anticipates that its pre-tax profit in 2025 will be slightly lower than last year, whereas the previous expectation was for it to remain roughly the same as last year. Additionally, BMW Group has significantly lowered its forecast for free cash flow in its automotive business.

BMW Group currently expects its automotive business free cash flow to exceed €2.5 billion (approximately $2.9 billion), down from a previous expectation of "over €5 billion." In a statement on the evening of October 7, BMW Group stated that part of the reason for adjusting its financial outlook is to "support dealers in China" — as local banks have reduced commissions on the sale of automotive financial products, putting pressure on dealers.

BMW Group also stated that it had to adjust its expectations regarding the "timing of tariff refunds from U.S. and German authorities," with the total amount of the tariff refunds being in the "upper range of the three-digit million euro level." BMW Group currently expects this sum to be refunded next year, rather than the previously anticipated 2025. Last month, the U.S. reduced tariffs on cars imported from the EU to 15%, and this adjustment was retroactively effective as of August 1st.

After the report was released, BMW Group's stock price on the Frankfurt Stock Exchange in Germany dropped by as much as 7.1%, marking the largest decline since November last year. However, the stock's cumulative increase for this year still remains at approximately 3%.

Notably, BMW Group is hoping that its new generation of electric vehicles will drive a sales recovery. Last month, BMW Group launched the iX3 SUV, the first model in its Neue Klasse series, into which the company has invested more than 10 billion euros.

In the Chinese market, local competitors such as BYD and Xiaomi are continuously squeezing the market share of Western automakers in China with their feature-rich and low-priced electric vehicles. As the world's largest automotive market, the fierce competition in China is putting pressure on corporate profit margins, affecting luxury brands under the Volkswagen Group, Audi and Porsche. Recently, both Mercedes-Benz and BMW have reported a year-on-year decline in sales in China.

The difficulties in the German automotive industry are dragging down the country's overall economy. Data released by the Federal Statistical Office of Germany (Destatis) on October 8 shows that in August this year, the month-on-month decline in German industrial production reached its highest level since early 2022. This data confirms that Europe's largest economy is struggling to break free from years of recession.

The demand for luxury electric vehicles is weak, and coupled with sluggish growth in the European market and tariff pressures in the U.S. market, multiple factors are exacerbating the difficulties for automobile manufacturers. Many companies have adjusted their strategies by cutting costs or reallocating funds to internal combustion engine and hybrid models to cope with the challenges.