Bayerische Motoren Werke Aktiengesellschaft ETR: BMW executives used the company’s quarterly earnings call Q&A session to address questions ranging from U.S. tariff “offset” mechanisms and China demand trends to cost measures, dealer network initiatives, and the margin levers management sees over the medium term.
The call was moderated by Max Borgmann, Head of Communications, with answers provided primarily by Oliver Zipse, Chairman of the Board of Management, and Walter Mertl, Board Member for Finance.
U.S. export credits and tariff assumptions
Responding to a question from UBS analyst Patrick Hummel about comments made earlier regarding potential U.S. export credits, Zipse said BMW has been explaining the “industrial logic” to stakeholders in the U.S., arguing that global production sharing is necessary because “the volumes per unit are too small to build every car in every country at the specific volumes.” He added that this approach supports U.S. political priorities of “growth” and “jobs.”
Zipse said the concept was less about whether it helps and “more a matter… how do I execute it,” calling it “only a matter of execution and then it’s a matter of timing.” He also pointed to a prerequisite step in Europe: “The most important ingredient is the first step in Brussels to implement the EU Battery Regulation, and then we can do that second step.”
Later, Barclays analyst Henning Cosman asked whether an “offset mechanism” related to U.S. tariffs was included in BMW’s unchanged full-year tariff assumption. Mertl replied it was not: “Offset mechanism is not included in my one and a quarter, clearly not,” referring to the company’s stated tariff burden assumption of 1.25%.
China and the role of a “technology open” product portfolio
On China, Zipse described impressions from the Beijing Auto Show after meeting competitors. He characterized much of the show as heavily concentrated in battery-electric vehicles, larger SAVs, and autonomous-driving-focused offerings, calling it “almost a monoculture.” In contrast, he said BMW’s presentation emphasized “the full breadth of a premium player,” including MINI “with all drivetrains available,” BMW “individualization,” “V8s,” “the Neue Klasse fully electric,” and “our focus on hydrogen.”
Zipse argued this breadth increases resilience. “Let’s just look at the first three months,” he said. “EV sales in China were plummeting… What happened? Our ICE sales went up at the same minute.” He added that China illustrates the value of being “a full segmenter” and “technology open.”
In another exchange with Bank of America analyst Horst Schneider, Zipse said BMW’s global BEV sales declines in the U.S. and China were “almost fully compensated by higher ICE sales,” while Europe was moving in the opposite direction, with BEV sales “above previous year level” even “before the ramp-up of the Neue Klasse.”
Zipse also attributed China’s trend in part to policy changes. “In China, it’s mainly caused by the reduction of the subsidies for BEV cars,” he said, adding that roughly “30% of the whole market is BEV” and that the remainder includes other electrified powertrains such as plug-in hybrids and range extenders.
Neue Klasse timing, dealer sentiment, and product roadmap notes
BMW’s “Neue Klasse” program was a recurring topic, particularly around ramp timing and competitiveness in China. Mertl told Goldman Sachs analyst Christian Frenes that BMW plans to “start the iX3 in Q4,” followed by additional models including a “3 Series” in 2027, consistent with what the company has previously communicated. On pricing in China, Mertl said pricing decisions will be made “just before the start of sales,” citing market dynamics.
Dealer feedback in China was discussed in multiple answers. In response to Bernstein analyst Stephen Reitman, Mertl said BMW held a “brand summit and a brand night together with the dealers,” and that this was received “very, very well,” with dealers feeling BMW is “on eye level with Chinese OEM locally.” He also said dealers were “positively surprised about the 3 Series” presented in China.
Mertl added that BMW has been working to improve dealer performance and said a dealer “right-sizing exercise” was “more or less finished,” while noting such work continues.
Redburn Atlantic analyst Stuart Pearson asked about premium SUV competition and BMW’s position in China. Mertl said the company was confident bringing Neue Klasse technology into the market, and discussed the X5 specifically, stating that in Q1 BMW “sold more X5s with a better transaction price this year than in Q1 2025,” adding that “a new X5 is coming in China in 2027” and has been presented to dealers. He also emphasized that BMW offers the X5 with “all powertrains in China.”
Costs, headwinds, and margin levers
Mertl cited several financial and cost themes across answers. Addressing JPMorgan analyst José Asumendi on headwinds and tailwinds, Mertl said year-on-year Q1 headwinds were “majority… about exchange rate and commodities,” with much of the impact expected in the first half of the year. He said Q1 included “roughly EUR 400 million” of this effect and that there would also be an impact in Q2, “then slowing down in Q3, Q4.”
On tariffs, Mertl contrasted the current assumption with prior-year levels, saying Q1 did not include “the extra U.S. tariff happening,” and noting that last year’s tariff burden in Q2 to Q4 had been higher than Q1. He reiterated the guidance assumption of “1.25% burden,” which he said was less than the full-year burden of 1.5% last year.
Mertl also discussed research and development expense trends, saying R&D expenses were “down by 12%,” while depreciation increased, and that the capitalization ratio “came down from 34% to 31%,” which he noted had been flagged previously. He said additional depreciation comes with “every new start of production.”
Pressed by Pearson for more detail on “other” items in a roughly EUR 400 million line, Mertl said manufacturing costs were a “low three-digit positive element” and warranties were also a “low three-digit positive element.” He added that BMW “didn’t have to add any extra provisions” versus previous years, while tariffs were a negative within the same bucket.
On medium-term margin potential, Jefferies analyst Philippe Houchois questioned how BMW could sustain an 8%-10% margin corridor given changes in China profitability and tariffs. Mertl said the target was “not unreachable” and framed the bridge as “3 times 1 EBIT point”:
- Performance mix and contribution: Mertl cited the BMW “ecosystem,” “Alpina to come,” and said Gen6 Neue Klasse has “a much better contribution margin than the Gen5.”
- Variable cost initiatives: He referenced “material cost,” “manufacturing cost,” “warranty cost,” and logistics optimization through the company’s global footprint.
- Fixed cost reductions: Mertl said fixed costs are expected to come down “step by step in 2026 and 2027 and also in 2028.”
He also highlighted purchase price allocation (PPA) depreciation as a significant factor, calling it a “choker” worth “1.1.2 EBIT points” and said it lasts “until mid-2028,” with partial impact in 2028 and a full effect in 2029.
When Cosman asked whether management was signaling performance toward the upper half of BMW’s 4%-6% automotive EBIT margin corridor, Mertl declined to narrow the range. “A corridor is still a corridor,” he said, noting Q1 was “5.0%” and reaffirming the “4%-6%” guidance.
UK FCA provision and finance penetration rate
Houchois also asked about the Financial Conduct Authority (FCA) matter in the U.K. Mertl said he was “really disappointed” by the authority’s outcome despite BMW’s engagement and amendments proposed during the process. He said he continued to regard the scheme as “unfair and disproportionate.” While he acknowledged there were “legal grounds for challenge,” he said that without “a meaningful cohort of other U.K. lenders, especially all banks,” pursuing a legal challenge would not be in shareholders’ best interests given the uncertainty. “That’s the reason why we’re not challenging it,” he said.
On BMW’s financial services business, Frenes asked about a rise in penetration rate to 51.6% from 43%. Mertl attributed this partly to prior-year dynamics in China, where commission structures affected bank behavior. He said commission levels changed after “end of June,” allowing BMW’s penetration ratio to improve in the second half of 2025 and continue into Q1. He also noted that “young used car” is included within BMW’s “new cars” classification and that a definition change affects the percentage by roughly “two and a half to 3%,” while not changing the total business volume.
Zipse closed one of his strategic answers by cautioning against overemphasis on “singular hype” and “too much bets on a singular technology,” arguing that long-term winners will be “system integrators” able to combine technologies into durable, serviceable vehicles while meeting CO2 regulations profitably.
About Bayerische Motoren Werke Aktiengesellschaft ETR: BMW
Bayerische Motoren Werke Aktiengesellschaft, together with its subsidiaries, engages in the development, manufacture, and sale of automobiles and motorcycles, and spare parts and accessories worldwide. It operates through Automotive, Motorcycles, and Financial Services segments. The Automotive segment engages in the development, manufacture, assembling, and sale of automobiles, spare parts, accessories, and mobility services under the BMW, MINI, and Rolls-Royce brands. The Motorcycles segment develops, manufactures, assembles, and sells motorcycles and scooters under the BMW Motorrad brand, as well as spare parts and accessories.
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