BMW Profit Warning Triggers Sell-Off Across European Auto Sector

BMW now expects its automotive earnings before interest and tax margin to land between 1% and 3%, a steep drop from the previously forecast 4% to 6%. The company also downgraded its return on capital employed for the automotive unit to a range of 1% to 5%, down from the earlier 6% to 10% projection. Group profit before tax is now slated for a significant decline, reversing earlier guidance that suggested only a moderate dip.

Bernstein analysts characterized the move as a rare misstep for the automaker, particularly given that the company had reiterated its margin corridor just months ago. New Chief Executive Milan Nedeljkovic, having taken the helm only last month, is now moving to accelerate cost-cutting measures. While these structural shifts could eventually include headcount reductions and factory closures in Europe, they offer no immediate fix for the stagnant conditions in China. RBC Capital Markets analyst Tom Narayan noted that the macro-driven struggles in Asia serve as a grim indicator for other European manufacturers, who may face similar warnings ahead of their own second-quarter earnings reports. Following the announcement, BMW shares tumbled 11%, while Mercedes-Benz, Volkswagen, Stellantis, and Volvo Car saw losses between 3% and 5%.