BMW has sent shockwaves through the automotive sector by sharply lowering its profit expectations for 2026. The German luxury carmaker reduced its expected automotive EBIT margin to a range of 1% to 3%, down from the previous guidance of 4% to 6%. This warning, as detailed by TNW Neural, triggered a stock plunge of over 7%, hitting levels not seen since 2020.
The Erosion of the China Profit Pool
The crisis highlights a systemic shift in the world's largest auto market. BMW reported a 17.6% drop in Chinese deliveries during the first five months of the year, as domestic giants like BYD, Xiaomi, and NIO undercut European premium pricing with comparable EV technology.The trend is industry-wide: Porsche's China deliveries plummeted from 93,300 units in 2022 to an estimated 41,900 by 2025. Volkswagen also saw its operating profit from Chinese joint ventures nearly halve to €958 million. Citigroup analysts note that China once accounted for roughly half of the operating profits for both BMW and Mercedes-Benz, making this decline a critical blow to their business models.
The European Frontline
Chinese manufacturers are no longer just competing in Asia; they are aggressively expanding into Europe. Market share for Chinese brands has grown from nearly zero in 2021 to just under 10% of the total market, reaching nearly 16% in the EV and plug-in hybrid segment.To bypass EU tariffs, companies are shifting to local production. Geely is leveraging Volvo's European plants, and BYD has started trial production in Hungary. This strategy allows them to maintain Chinese cost advantages while operating within the European Union's regulatory framework.