BMW Confronts Profit Pressures Amid Economic Hurdles and Trade Tariffs

BMW anticipates slight sales growth in 2025 but warns of flat earnings due to economic challenges in China and rising tariffs. The company projects consistent pre-tax profits but lower margins, impacted by trade policies and competition. Significant investments in R&D for future products and strategic adjustments are underway to mitigate pressures.

BMW forecasts modest sales growth for 2025 but predicts stagnant earnings due to economic hurdles in China and escalating tariff costs. The German car manufacturer, which significantly relies on profits from China, faces heightened competition from local brands offering notable discounts amid a luxury spending slowdown.

The company expects pre-tax profit levels to be consistent with 2024; however, it anticipates that the automotive division’s profit margin will remain between 5% and 7%—well below its typical target of over 8%.

Furthermore, U.S. trade policies are projected to diminish profit margins by approximately one percentage point due to new tariffs on steel, aluminum, and vehicle imports. This could potentially result in earnings declining by hundreds of millions of euros. In response, BMW is reassessing production locations and enhancing U.S. component manufacturing to alleviate these effects.

Additionally, BMW is confronting weakened demand for electric vehicles alongside trade tensions between the U.S. and China, which may further strain profitability. In 2024, the automotive EBIT margin decreased to 6.3%, down from 9.8% the previous year, with fourth-quarter margins dropping to 5.5%. Consequently, group EBIT fell to €11.51 billion from €18.48 billion, and revenue declined by 8.4% to €142.38 billion.

Despite these adversities, BMW is committed to investing in its upcoming product lineup, expending over €18 billion in 2024 on research and development, particularly focusing on the Neue Klasse digital production platform. The first model from this series is set to launch later this year, with plans to introduce over 40 new or updated vehicles by 2027, including a hydrogen-powered fuel-cell electric vehicle in 2028.

While BMW foresees favorable market conditions in the U.S. and increasing demand for electrified vehicles in Europe, it recognizes the continued complexities of the Chinese market. To enhance competitiveness, BMW is prioritizing the rollout of critical models, including the new BMW 5 Series, BMW X3, updated Mini offerings, and the revamped BMW 2 Series Gran Coupe.

The automaker has reduced its dividend from €6 to €4.30 per share, slightly below analyst predictions. Additionally, BMW seeks shareholder consent for a buyback of up to 10% of its share capital over the next five years, demonstrating a commitment to innovation and adaptation amid ongoing financial pressures.

In summary, BMW is projected to experience slight sales growth, yet its profitability is expected to remain under pressure due to challenges in China, rising tariffs, and intensified competition. The company is implementing strategic measures to adjust production while actively investing in new technologies and vehicle lines. Despite a reduction in dividends and the anticipation of continued economic challenges, BMW is prioritizing innovation to maintain its market position.

Original Source: www.cbtnews.com