BERLIN – Shares of luxury automaker BMW (BMWG.DE) plunged by as much as 7% on Wednesday after the company unexpectedly cut its 2025 earnings forecast, citing a combination of continued weakness in the Chinese market and delays in receiving crucial customs refunds.
The German firm announced late Tuesday that it now expects its pretax earnings to decline slightly this year, a revision from its prior guidance which anticipated a flat outcome compared to 2024.
The cut reverberated across the sector, with rival Mercedes Benz (MBGn.de) also seeing its shares drop 3.5% after reporting similar issues related to tariffs and China sales.
Guidance Halved on Cash Flow
Citing delays in refunds from customs authorities in the U.S. and Germany, BMW significantly lowered its financial expectations:
- Free Cash Flow: Expectations for free cash flow from its automotive business were halved to above €2.5 billion (approximately $2.9 billion).
- Automotive Profit Margin: The forecast for the core automotive segment’s profit margin was narrowed to 5-6%, down from the previous range of 5-7%.
BMW, which is Germany’s top auto exporter by value and operates its largest plant in the U.S., still assumes the European Union will retroactively implement a tariff reduction to zero from the current 10% duty following a framework trade deal with the U.S. However, it now expects a “high three-digit million figure” in customs reimbursements only next year.
Commenting on the tariff news, RBC analysts noted the disappointment, stating, “The tariff news is disappointing, especially given our expectation that BMW could be well-positioned on tariffs vs peers.”
Analyst Focus Shifts to China
While tariff timing contributed to the immediate guidance cut, analysts from UBS and JP Morgan suggested that the more significant concern lies with the demand environment in China.
JPMorgan analysts wrote, “More important than the impact of tariffs will be the firm’s ability to stabilise the volume momentum and pricing power in China in FY26, which will ultimately ensure the longer term competitiveness of the group.”
BMW confirmed that while sales in Europe and the U.S. rose through the January-September period, sales in China were below expectations, highlighting the persistent challenges in its crucial Asian market.
The company is scheduled to publish its full quarterly results on November 5.
