BMW's strategy: Job cuts, AI and a €2bn bet on ‘Made in Germany’

BMW shares experienced a significant increase of over 3% in early European trading on Wednesday as investors assessed the German automaker's recent recovery plans during its two-day Capital Market Day event on Tuesday and Wednesday. Amid the shift to electric vehicles, global supply disruptions, high energy prices, and intense competition from Chinese rivals, German car manufacturers are striving to regain profitability.

BMW aims to enhance profitability by streamlining its model range, reducing development times, and fostering closer collaboration with suppliers. Additionally, the company intends to trim its division count and related management positions by 20% by mid-2027 as part of an extensive restructuring effort. The automaker also plans to minimize the number of model variants and leverage artificial intelligence more extensively, including for crash simulations and driver assistance systems.

BMW has set its sights on elevating its automotive operating margin to a range of 3% to 5% by 2028 and restoring its long-term objective of 8% to 10% at the beginning of the next decade, signifying a prolonged recovery period. The company announced plans to invest approximately €2 billion in German production facilities, including €1 billion dedicated to a battery plant.

According to Raymond Wittmann, BMW's production chief, the Munich plant, which is over 100 years old, will transform into an electric vehicle production site starting in 2027, manufacturing the BMW i3. Simultaneously, combustion-engine and plug-in hybrid variants of the BMW 3 Series will be produced in Dingolfing. Over 70% of BMW's production sites are situated in Europe, with more than 30% located in Germany.

The Munich-based carmaker also introduced a new battery plant in Irlbach-Straßkirchen, Bavaria, which will provide high-voltage batteries for the electric BMW i3 beginning in October. This facility is anticipated to contribute to regional value creation, secure skilled employment, and provide a future location within Lower Bavaria's industrial ecosystem.

Wittmann highlighted the significance of the battery plant in bolstering Germany's position in the electric vehicle technology sector. He emphasized that the nation's enduring industrial prosperity hinges on an environment that fosters investment, innovation, and competitiveness.

In Austria, BMW's Steyr plant will manufacture essential electric drive components and combustion engines for the new 3 Series lineup. The company currently produces more than one million vehicles annually at its German plants, accounting for roughly a quarter of all cars manufactured in the country. BMW also adheres to a "local for local" strategy, producing vehicles close to the markets they serve.

As part of its expansion of local production and development in China, the Shenyang plant will manufacture a customized version of the 3 Series tailored to Chinese consumers. In China, BMW is also reducing its dealer network and incorporating more locally sourced components, which could lower part costs by 20% to 30%, as per Bernstein.

BMW's production strategies follow a recent profit warning in June. In July, the company agreed to a voluntary redundancy program projected to decrease its global workforce by around 8,000, as reported by dpa through company sources. In the first half of 2026, BMW's profitability faced considerable strain, with operating profit falling by 37% to €3.64 billion and revenue declining by 8%, the steepest decline among the 19 car manufacturers studied.

China accounted for a significant portion of the decline, with vehicle sales dropping 19%, surpassing growth of 6% in Europe and 4% in the United States.