Earthquake in Bavaria – minus 84%! Drastic profit drop at BMW

In concrete terms: it means that the company earned 83.8 percent less than a year ago, in figures only 476 million euros. But that seems worse than it is. BMW boss Oliver Zipse spoke of “extraordinary expenses in the third quarter” and announced improvements by the end of the year. BMW is therefore not fundamentally in a deep crisis, as is the case with VW.

The vehicles that are still waiting for their brakes to be replaced and thus fill BMW’s warehouses will be sold in the coming weeks. The news was still poorly received in the stock market. BMW shares temporarily fell to their lowest level since March 2022. But shares of other German car manufacturers also fell sharply.

The margin is just above zero
In the past quarter, the company’s key profit margin in the automotive sector fell to 2.3 percent, after reaching the 10 percent mark a year ago. The company expects 6 to 7 percent for the full year; BMW has set a long-term target of 8 to 10 percent. BMW mainly cites problems with the braking system as the reason for the weak quarter.

In the worst case, the brakes of 1.2 million already delivered cars would have to be replaced, says CFO Walter Mertl, and provisions have been made for this in the order of three figures of millions. Because the electronic braking system was mainly installed in more expensive vehicles, the delivery bans imposed in some countries had a noticeable impact on the figures.

Problem market China: One third fewer sales
Operating profit fell by almost two-thirds this year to just under 1.7 billion euros in the third quarter, while turnover fell by 15.7 percent to 32.4 billion euros. The figures were worse than analysts surveyed by the company expected.

However, there is also a general weakness in the Chinese market, which is currently also affecting competitors such as Mercedes-Benz, Volkswagen and Porsche. BMW sold almost a third fewer cars in the People’s Republic in the summer quarter. BMW is now helping its dealers, says Mertl, for example by paying out bonuses early. The goal is to improve retailers’ profitability.

The finance chief attributed about half of the sales decline to the brake problems and predicted improvement in the fourth quarter. However, the current development on the Chinese market does not match BMW’s growth ambitions, according to Zipse. He spoke of significant price pressure in the lower market segments and especially among Chinese manufacturers. BMW, in turn, partially responds with price cuts. The Mini produced in China is currently affected.

China difficult for European car manufacturers
Porsche and Mercedes-Benz recently announced that they want to make savings to combat the slowdown in China. The German premium brands used to be leaders in their segment in China. But the world’s largest car market is quickly transitioning to electric cars. The Germans are losing out to cheaper Chinese competitors. In addition, there is the price drop on the Chinese real estate market, which is affecting the wealthy Chinese, the traditional group of buyers of German premium vehicles.

What happens after Trump wins?
Jürgen Molnar, investment strategist at broker RoboMarkets, said that while BMW mainly blames weaker Chinese companies for the profit decline, possible punitive tariffs in the US after Donald Trump’s election victory were also causing headaches. Zipse referred to the large BMW factory in Spartanburg, where mainly SUVs roll off the assembly line. “Especially when there are changes in geopolitics, it’s good to be in the country, and that’s us.”