BMW Reports 11% Drop in Pretax Profit as Restructuring Hits Margins

BMW reported an 11% drop in third-quarter pretax earnings to €2.1 billion ($2.4 billion), warning that restructuring costs will depress its core automotive operating margin to between minus 0.5% and 0.5% this year.

Chief executive Milan Nedeljkovic announced plans to speed up structural cuts, including 8,000 layoffs in Germany, after issuing the group’s second profit warning in less than five months late on Tuesday.

Quarterly revenue slid 6% to €30.4 billion as sales in China fell 22% across the first nine months of the year, pressuring core automotive margins down to 3.4% from 5.2% a year earlier.

Margin Pressure Across Asian Showrooms

German premium brands face an unprecedented squeeze in China, where aggressive price cuts by domestic electric vehicle manufacturers have eaten away foreign market share. BMW’s operating performance reflects that erosion directly. Excluding the one-off restructuring charges, management expects an underlying margin above 2%, down sharply from its historic operational corridor.

Rival Mercedes-Benz likewise booked lower earnings for the third quarter. Porsche managed a small rebound after previous model overhaul charges, though it continues to scale down exposure to mainland buyers. Foreign vehicle importers can no longer rely on Chinese dealership networks to generate outsized cash flow to bankroll global operations.

Factory Reorganisation and Export Reorientation

Chief executive Milan Nedeljkovic is reorganising the group’s manufacturing footprint to protect returns. BMW plans to localise component supply chains and technical development inside China, turning its mainland assembly lines into an export hub targeting wider Asia-Pacific territories.

Current developments in our industry call for decisiveness and swift implementation. We will therefore specifically intensify and accelerate structural measures.

The revised regional framework also introduces tailored product lines elsewhere. The carmaker plans an expanded range of large luxury sport-utility vehicles for US buyers and an entry-level platform designed specifically for Europe.

The Neue Klasse Rollout

This revision marks the second profit warning BMW delivered within five months. Operating margins in the core vehicle division had held at 5.2% during the third quarter of last year before aggressive domestic discounts in China wiped out dealer pricing power across Tier 1 and Tier 2 cities.

The company now relies on its new architecture to stop the slide. Deliveries of the Neue Klasse platform begin in China this month with the retail launch of the electric iX3, setting up a critical test for Nedeljkovic’s long-term margin target of 8% to 10%.