German premium carmaker BMW will unveil plans to expand local production as it seeks to restore profitability following a series of profit warnings caused by weak performance in the Chinese market. Analysts at Bernstein said this on Wednesday, UNN reports, citing Reuters.
Details
BMW is due to present an updated strategy later on Wednesday at a Capital Markets Day event for investors, but Bernstein analysts outlined the key elements of the plan in an analytical note following a meeting with the company’s management.
BMW’s reputation as a resilient company took a hit in June when it unexpectedly announced a cut to its profit forecast — the third such reduction in just over three years due to problems in the Chinese market. The setback highlighted the challenges facing European automakers amid falling sales in China and the imposition of tariffs in the United States.
In response, the Munich-based automaker launched a workforce-reduction program that is estimated to affect around 8,000 jobs in Germany, thereby joining Volkswagen and Mercedes-Benz (MBGn.DE) in cost-optimization measures.
BMW, whose shares have fallen by more than a third over the past year, reaching their lowest level in more than six years, is presenting its recovery plan during a two-day event in Munich and at the company’s country estate, "Gut Schwaerzenbach," in Bavaria.
According to Bernstein, BMW will set a medium-term profitability target for its automotive division of 3–5% by 2028.
By the early 2030s, the company plans to restore profitability to 8–10%, which would represent a significant improvement compared with the latest figure of 2.3%.
"At BMW, they understand that the solution is not only about cutting costs. The company is also seeking to drive growth through innovative products," said Bernstein analyst Stephen Reitman, adding that the Neue Klasse lineup, led by the iX3 electric crossover, plays a key role in the recovery plan. According to Bernstein analysts, BMW will confirm plans to launch a luxury SUV positioned above the X7 in the lineup, as well as expand the M and Alpina ranges starting in 2027, with the aim of strengthening its position in the premium segment.
A BMW representative said details of the strategy would be disclosed later on Wednesday.
Separately, the company said it intends to invest around 2 billion euros ($2.3 billion) in producing the next-generation 3 Series sports sedan in Germany.
According to Bernstein estimates, BMW’s production facilities in Europe and the United States are operating at full capacity, while China is the "main region requiring production adjustments and capacity flexibility."