BMW experiences a significant drop in profits, exceeding 25%
BMW Navigates Challenges Amidst Tariffs and Market Volatility
BMW, the renowned German automaker, is facing significant hurdles in the global auto industry. The company's profits and sales are under pressure due to various factors, including tariffs, declining revenues in China, and falling electric vehicle (EV) sales in North America.
In the first half of 2025, BMW experienced an 8.2% drop in automotive segment revenue, largely attributed to a 15.5% decline in Chinese retail sales. Shipments to China fell 14% in Q2 2025, primarily due to intense domestic competition from companies like BYD. This weak demand in the world’s largest EV market is a major pressure point for BMW.
Tariffs have also reduced BMW’s EBIT margins by 1.5 to 2 percentage points in the first half of 2025. The company navigates margin pressure from tariffs, particularly affecting electric vehicle (EV) shipments and profitability. Despite U.S. tariffs of 25% on imported vehicles, BMW’s U.S. sales grew, showing some resilience.
BMW’s EV sales fell sharply in North America and overall in Q2 2025, with a 21% decline in battery electric vehicle (BEV) deliveries compared to the previous year. This reflects tariff disruptions, shifting market dynamics, and strong competition. Notable drops were seen in flagship models like the i5 and i7 sedans.
Despite these challenges, BMW maintained a solid EBIT margin of 6.2% for its automotive segment in H1 2025, within its 5–7% target range. Strong free cash flow generation (€1.9 billion in Q2 and expected over €5 billion for the full year) and disciplined cost management support financial stability.
BMW is strategically focusing on electrification and innovation, planning to launch more than 40 new or updated models by 2027, aiming to solidify its leadership in the premium EV market. The company is hopeful about the Neue Klasse, with the first production vehicle of the series to be presented at the IAA in September.
BMW Group's CFO, Walter Mertl, emphasizes that despite tariff burdens, the company's business model remains intact. The automaker's footprint in the US helps limit the impact of tariffs, according to Mertl.
Despite the declines, BMW CEO Oliver Zipse views the company's half-year results as evidence of the robustness of the business model. BMW earned 4 billion euros after taxes in the first half of the year, a 29% decrease compared to the same period last year. Tariffs have resulted in a more than 27% drop in BMW's profits in the first half of the year.
BMW does not provide a forecast for post-tax profits. However, industry expert Ferdinand Dudenhöffer sees the New Class as crucial to BMW's future success, especially in the key market of China. If tariffs on car exports from the US to Europe are reduced from 10% to zero, BMW would benefit to some extent, but this effect would not offset the burden of the 15% tariffs on exports to the US.
It's worth noting that BMW's profits have declined for the third consecutive year in the first half. However, BMW's rivals, such as VW, Audi, and Mercedes-Benz, have all experienced greater profit declines than BMW in the first half.
Munich residents have emerged from the first half of the year "stable, but not unscathed" due to BMW's global presence. BMW has a plant in Spartanburg, US, that produces about half of the cars it sells there, and another 200,000 cars are exported to other countries.
In conclusion, BMW is navigating a complex environment, with tariffs impairing margins and disrupting EV shipments, significant declines in the Chinese market due to strong local competition, and falling EV sales in North America. However, disciplined cost management, robust free cash flow, and strategic investments in electrification help mitigate these pressures.
In an effort to combat the financial challenges posed by tariffs and market volatility, BMW is focusing on service innovation and technological advancements, planning to launch over 40 new or updated models by 2027 to solidify its position in the premium EV market. Despite difficulties faced in both the Chinese and North American markets, BMW continues to invest in technology, aiming to create competitive and culturally relevant products for diverse markets.
