BMW plans margin rebuild with simpler lineup and pricier cars
It wants to rebuild profitability after China’s ongoing price war and heavy spending on its electric-car overhaul squeezed returns
BMW aims to mend its financial performance by streamlining its product lineup and offering pricier vehicles, according to Bernstein analysts who attended the company's capital markets day in Munich. The German automaker is working to recover profitability after China's ongoing price war and heavy investments in its electric-car initiative eroded returns.
Management targets auto margins of 3% to 5% by 2028 and 8% to 10% in the early next decade, with Bernstein analyst Stephen Reitman outlining these updated financial goals in a note on September 30. Once a symbol of German car manufacturers' resilience, BMW now faces challenges due to a significant profit warning in June, fueled by China's economic decline, intense local competition, and the high costs of electrification.
New CEO Milan Nedeljkovic's mission is to restore returns while funding the necessary technology and new models to maintain competitiveness. Reitman states that 2026 will be a transition year, with profitability expected to rebound in stages. Bernstein has an outperform rating on BMW shares with an 82 euro price target. The company's recovery strategy begins with simplification, as BMW acknowledges its current product range has become overly complex, plans to reduce development times, and strengthen supplier partnerships.
In China, BMW is also reducing its dealer network and sourcing more standardized local components, potentially lowering component costs by 20% to 30%, according to Bernstein, citing CFO Walter Mertl. The automaker is banking on more expensive, higher-margin models to boost profits, including a new SUV surpassing the X7, additional high-performance M cars, and a larger role for Alpina, positioned between its mainstream luxury lineup and Rolls-Royce.
European orders for BMW's new generation of electric cars have already exceeded 100,000, as per Bernstein.
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