BMW sees tariffs, China sales decline weighing on carmaking profit

By Wilfried Eckl-Dorna

  BMW AG’s carmaking profits will lag well below its long-term targets this year, weighed down by escalating trade tensions between the US and Europe and muted sales in China.  

The German manufacturer expects an automaking margin of between 5% and 7% this year, after the measure fell to 6.3% in 2024, the lowest in four years. BMW’s long-standing aim is to keep its carmaking returns above 8%.

 

BMW shares declined as much as 4.5% on Friday. The stock has fallen more than 20% over the past year.

 

BMW is facing another difficult year as it grapples with intense competition in China, where local electric-vehicle producers led by BYD Co. are taking over. At the same time, tariffs in the US and Europe are clouding the outlook and are expected to cost the carmaker about €1 billion this year, Chief Executive Officer Oliver Zipse said in an interview with Bloomberg Television.

 

The company is looking to reclaim market share as it starts production of its Neue Klasse, a new line of EVs, later this year. BMW plans to release 40 new and updated vehicles of all drivetrain variants onto the market by 2027.

 

“We have growth ambitions because we have strong products,” Zipse said. “We look with a positive mood into 2025 despite all the political turmoil we might have.” 

 

 

US tariffs are already hitting the cars BMW manufactures in San Luis Potosi, Mexico. President Donald Trump postponed the levies for companies in compliance with the USMCA trade deal, but BMW falls short of local content rules. 

 

In response, the company is looking into locating more manufacturing in North America to comply with the agreement, production head Milan Nedeljkovic said. Some investments already planned in the US and Mexico will help close the gap.

 

Even so, the situation could worsen if Trump follows through with levies on vehicles imported from Europe, where the company makes its top-line sedans.

 

“We don’t think that all these tariffs will last very long, though some of them might last longer,” Zipse said. With a cost estimate of €1 billion, “we are quite safe,” he added.

 

BMW’s overall net profit declined about 37% in 2024 to €7.68 billion ($8.3 billion). The carmaker was weighed down by a recall related to braking systems supplied by Continental AG. 

 

BMW’s global car sales dropped 4% last year, with weaker performance in China dragging on results. The company’s namesake brand and Mini deliveries fell 13.4% in the Asian nation, as the group contended with declining car prices and higher manufacturing costs. Mercedes-Benz Group AG registered a 7% decline in deliveries in China last year, while Porsche AG sales slumped 28% there. 

 

BMW expects car sales to grow slightly this year as inflation stabilizes and moderate interest rate cuts help demand, even as the situation in China continues to be challenging.

 

“We are concerned that BMW is assuming growth in Europe and the US to offset declines in China – this may prove optimistic,” Citi analyst Harald Hendrikse said in a note.