BMW drops after forecast cut on weak China sales, tariff costs

BMW now expects free cash flow of above €2.5 billion ($2.9 billion), down from above €5 billion previously

BMW AG shares declined after the company lowered its financial guidance on persistently weak sales in China and tariff-related costs, underscoring the difficulties Germany’s export-reliant auto industry is facing.

The stock fell as much as 5.2% in Frankfurt, after the luxury-car maker said it now sees pre-tax group earnings slightly lower in 2025 compared to last year. That’s down from an earlier expectation of an on-par result. BMW also slashed its projection for automotive free cash flow. The shares are still up around 6% this year.

Western manufacturers are losing ground in China to homegrown rivals such as BYD Co. and Xiaomi Corp., which are offering feature-packed EVs at low prices. Fierce competition in the world’s biggest auto market is squeezing profit margins, hitting also Volkswagen AG’s Audi and Porsche AG. Earlier on Tuesday, Mercedes and BMW released third-quarter figures that showed declining unit sales in China.

The slack demand for luxury EVs is weighing on automakers already dealing with muted growth in Europe and duties in the US. Several of them have corrected course by cutting costs or shifting funds back into combustion-engine and hybrid models.

BMW now expects free cash flow of above €2.5 billion ($2.9 billion), down from above €5 billion previously. The changes to guidance are related in part to payments to support dealers in China, under pressure from lower commissions from local banks on the sale of financial products, the carmaker said in a statement late Tuesday.

“While disappointing, the lower volumes in China are understandable given the challenges in the Chinese real estate market,” RBC Capital Markets analyst Tom Narayan said in a note. “BMW’s adjusted volume planning and dealer compensation initiatives could offer some relief, though we continue to view China as a headwind” this year.

The Munich-based company said it’s also had to change assumptions on when it’s due to be repaid customs duties from US and German authorities totaling a “high three-digit million figure.” BMW now expects to be reimbursed next year instead of in 2025. The US last month lowered tariffs on auto imports from the European Union to 15% retroactive to Aug. 1.

BMW is betting that its next-generation EVs can help bolster sales. The company last month unveiled the iX3 sport utility vehicle, the first of its Neue Klasse line the manufacturer spent well over €10 billion on.