BMW's Tough Start to 2025: China's Impact on Profits - Forecast Uncertainty Remains
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Decline in BMW Profits Sanctioned by China - Forecast Endorsed - China's Permissive Approach Allows BMW's Revenue Decline - Forecast Corroborated
BMW is grappling with a challenging beginning to 2025. The company recorded a pre-tax profit of over 3.1 billion euros in the first quarter, a 25% decrease from the previous year.
A struggling China market tarnished the results, and while the effects of U.S. tariffs were yet to reach their full reflection in the existing figures, they are projected to enhance their influence in the remainder of the year. Nevertheless, BMW is holding firm to its projection and seems relatively stable compared to competitors who've experienced more substantial declines.
The rougher the conditions, the more crucial products, strategy, and adaptability become, said Oliver Zipse, CEO. By catering to varying customer preferences worldwide, the company can deliver robust results and stay on course to meet its annual targets. Among other factors, the current strong order intake gives him optimism.
The stable forecast - in March, the automaker predicted a pre-tax profit equivalent to the previous year, roughly 11 billion euros - is also bolstered by BMW's expectation that tariffs will not be permanent. Finance chief Walter Mertl anticipates reductions starting in July, with the highest impacts expected in the current second quarter, although he did not provide further details. CEO Zipse expects the North American free trade zone to be reinstated, which would also benefit BMW.
Even the April publication of first-quarter sales figures did not bode well: A substantial dip in China led the worldwide sales of the BMW group – including Mini and Rolls-Royce – to decrease by 1.4% to 586,000 vehicles. This resulted in a revenue of 33.8 billion euros, a 7.8% decrease from the previous year. However, the company noted growth outside of China and expects stabilization there, returning to a level of 700,000 vehicles per year.
BMW is not alone in its profit decline, and compared to its German competitors, it has fared relatively well: Rival Mercedes reported a sharp 43% drop to 1.73 billion euros for the first quarter. Another major premium competitor, Audi, reported a net profit of just 630 million euros, a 14.4% decrease due to an already weak comparison quarter from the previous year. Volkswagen, the German number one and Audi's parent company, saw a 41% decrease to 2.2 billion euros.
Compared to its competitors, BMW's decline appears less dramatic, and unlike others, it is maintaining its workforce at last year's level.
The mood in the industry is somber
The mood in the German automotive industry, including suppliers, is somber. The business climate index for the sector, as reported by the Ifo Institute, is deeply negative at -30.7 points. Export expectations have recently declined, and companies assess their competitive position outside the EU more negatively, according to economists.
The industry faces two major challenges: in China, automakers are facing increasingly strong domestic competition and intense price competition. In the U.S., the primary concern is uncertainty about how President Donald Trump's trade policies will evolve. Even U.S.-based company Ford has recently spoken of billions in charges due to Trump's trade policies.
BMW indeed produces around 400,000 vehicles annually in the USA, roughly the same amount as it sells there. However, more than half of these are exported, making BMW the largest US auto exporter by value, but also necessitating the import of other vehicles and parts into the country. Higher tariffs, therefore, significantly impact BMW.
However, BMW also leverages its long-standing influence in the US: Its strong presence there ensures it is heard. Nevertheless, BMW cautions, "Actual business performance may vary from these expectations" due to factors such as new tariffs or the extended duration of existing ones.
The news from Munich was well-received by the stock market: BMW shares rose significantly in early morning trading and were among the top gainers in the DAX index.
- BMW
- 2025 Profit Forecast
- U.S. Tariffs
- China
- Vehicles
- Oliver Zipse
- Free Trade Zone
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There appears to be a possible confusion in the year reference in your query, as the latest available updates and forecasts pertain to BMW's financials for 2025, not 2021. However, based on the available data regarding global market conditions (including China, U.S. tariffs, and related geopolitical factors), here is the current forecast and context for BMW’s profitability for 2025, which may help establish a relevant analogy and address your concerns:
BMW 2025 Profit Forecast and Key Factors
Profit Performance (Q1 2025):- Pre-tax earnings (EBIT): Exceeded €3.1 billion, with an EBIT margin at 9.2%[1][2].- Automotive Segment EBIT margin: 6.9%, at the upper end of the full-year guidance (5–7%) and above analyst expectations, but down from 8.8% the previous year[2][4].- Revenue: Fell 7.8% year-on-year to €33.8 billion in Q1 2025, primarily due to a decline in the Chinese market[3].
Impact of China:- The Chinese market has significantly impacted BMW’s revenue, with a notable revenue decline driven by weaker demand and competitive pressures in China[3].
Impact of U.S. Tariffs and Free Trade Agreements:- Tariffs: U.S. tariffs are currently affecting margins, but BMW expects these to be partially temporary, anticipating a reduction in tariffs starting in July 2025[3][4].- Market Outlook: BMW is maintaining its full-year guidance (2025) despite these headwinds, as it expects the tariff impact to ease in the second half of the year and sees rising demand in many markets due to stabilizing prices and moderate interest rate cuts[3][4].- Risks: If U.S. tariffs remain in effect well into the second half of the year, there could be further risks to earnings[3].
Growth Areas:- Electric Vehicles (BEVs): BMW’s fully electric vehicles were a strong growth driver, with deliveries up 32.4% year-on-year in Q1 2025. More than a quarter of vehicles delivered were electrified[2].- Technology-Open Approach: BMW’s strategy of offering a range of drivetrains (including ICE, hybrid, and electric) has helped maintain demand and profitability in a volatile environment[2].
Summary Table: BMW's Q1 2025 Key Financials
| Metric | Q1 2025 Value | Year-on-Year Change | Full-Year Guidance ||-------------------------------|-----------------------|---------------------|-------------------|| Revenue | €33.8 billion | -7.8% (China-driven)| — || Pre-tax profit (EBT) | >€3.1 billion | -25% (approx.) | — || EBIT margin (%) | 9.2 | — | — || Automotive EBIT margin (%) | 6.9 | -1.9 pp (vs. 8.8) | 5–7 (upper end) || BEV deliveries (y/y growth) | +32.4% | — | — |
- BMW's profit in the first quarter of 2025 was over 3.1 billion euros, a significant decrease of 25% compared to the previous year.
- The impact of China's market on BMW's results was substantial, despite the U.S. tariffs not having reached their full reflection in the existing figures yet.
- The CEO, Oliver Zipse, emphasized the importance of products, strategy, and adaptability in challenging conditions for the company.
- BMW expects tariffs to be reduced starting in July, with the highest impacts expected in the current second quarter, and anticipates a reinstatement of the North American free trade zone.
- According to the CEO, the current strong order intake gives him optimism for meeting the annual targets.
