BMW plans margin rebuild with simpler lineup and pricier cars

[MUNICH] BMW plans to restore margins by simplifying its business, cutting costs and selling more expensive cars, according to Bernstein analysts who attended the company’s capital markets day on Tuesday.

The German automaker is trying to rebuild profitability after China’s ongoing price war and heavy spending on its electric-car overhaul squeezed returns. Management is aiming to lift auto margins to 3 per cent to 5 per cent by 2028 and to its long-term target range of 8 per cent to 10 per cent early next decade, Bernstein analyst Stephen Reitman wrote on Wednesday (Sep 30) in a note.

BMW executives briefed analysts and investors on Tuesday and will publish the updated financial goals later on Wednesday on the second and final day of the CMD in Munich.

BMW had until recently stood out as the most resilient of Germany’s car manufacturers, helped by a flexible EV strategy and a premium-heavy lineup. That distinction vanished with a major profit warning in June, as China’s deepening slump, fierce local competition and the huge cost of electrification hammered margins.

New chief executive officer Milan Nedeljkovic’s challenge is to claw back returns while still funding the technology and new models BMW needs to stay competitive.

“BMW’s financial message is that 2026 is a transition year, with profitability expected to recover in stages,” Reitman wrote. Bernstein rates BMW outperform with an 82 euro price target. The shares are down about 40 per cent this year, and closed at 54.50 euros in Frankfurt on Tuesday.

The first leg of the firm’s recovery is simplification. BMW wants to pare back an offering it concedes has become too complex, shorten development times and deepen supplier partnerships.

In China, it is also shrinking its dealer network and sourcing more standardised local components, which could cut the cost of those parts by 20 per cent to 30 per cent, Bernstein said, citing chief financial officer Walter Mertl.

BMW is also betting that more expensive, higher-margin models can help lift profits. It’s planning a new SUV above the X7, its current flagship in the segment, more high-performance M cars and a bigger role for Alpina, the marque it is positioning between its mainstream luxury range and Rolls-Royce.

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Its new generation of electric cars is another pillar of the recovery, with European orders for the iX3 already topping 100,000, Bernstein said. BLOOMBERG