German carmaker BMW has issued its second profit warning in a year, pointing to the costs of a restructuring programme that includes 8,000 job cuts in its home market amid ongoing competition from China.
BMW is the latest in the German automotive sector to downgrade its outlook, following Mercedes-Benz. Western automakers have faced challenges keeping pace with lower-cost domestic rivals in China, resulting in declining sales in the region and increased exports to Europe.
BMW indicated the potential for losses after slashing its profit margin forecast for the year to between -0.5% and 0.5%, attributing the revision to fourth-quarter costs associated with restructuring. At the start of the year, the company had projected a possible margin of 4% to 6%.
On Wednesday, BMW reported an 11% decline in third-quarter pre-tax earnings to €2.1 billion. Sales in China dropped 22% in the first nine months of the year, a movement the company described as aligning with the broader market downturn.
Chief Executive Milan Nedeljković stated that industry developments require swift implementation, prompting the acceleration of structural measures. He added that China remains a key focus, with the group's Neue Klasse model revival launching in the country this month with the iX3.
BMW joins Volkswagen in managing restructuring expenses driven by rapid market changes. To accommodate the accelerated launch of its new generation of electric vehicles, the company is writing off parts of previous vehicle and technology generations while accounting for the costs of the redundancy programme.
The operating margin in BMW's core automotive business narrowed to 3.4%, down from 5.2% a year earlier, though it beat analysts' forecasts of 3.1%. Excluding restructuring charges, the margin would exceed 2%, falling within the previous forecast range.
Under the restructuring initiative, BMW plans to reduce management functions more rapidly. Revenue decreased by 6% to €30.4 billion in the third quarter, impacted by falling sales in China. Rival automaker Mercedes-Benz also reported lower third-quarter profits, while Porsche recorded a slight rebound following steep charges from its model lineup overhaul and retreat from China.
