Bayerische Motoren Werke Aktiengesellschaft Q2 Earnings Call Highlights

Bayerische Motoren Werke Aktiengesellschaft ETR: BMW said its restructuring program is designed to improve the company’s cost structure and support a return to its strategic automotive EBIT margin target of 8% to 10%, while maintaining its technology-open powertrain strategy, global manufacturing footprint and Neue Klasse product rollout.

During the company’s Q2 2026 investor and analyst Q&A session, CEO Milan Nedeljković said the program is centered on changing how BMW operates rather than solely on cuts in individual activities. He identified four pillars: sales and customer operations, organizational simplification, purchasing, and product development.

“The significant saving comes through the way of developing and purchasing parts and the overall way we approach the market on the sales side,” Nedeljković said. He said BMW sees direct sales as an opportunity to stabilize pricing and improve earnings, while organizational changes are intended to reduce internal complexity and shorten product time to market.

Restructuring Focuses on Cost Structure

On the purchasing side, BMW plans to pursue longer-term supplier partnerships and leverage its global value-creation footprint. Nedeljković said product development must make greater use of available industrial standards, while retaining the performance and specifications expected of BMW vehicles.

CFO Walter Mertl said the restructuring measures, including adjustments to working practices and greater use of digital tools, were agreed with the company’s works council in Germany. He said discussions with affected employees are expected to begin in the fourth quarter.

Mertl said BMW expects “hardly any cash outs” from the program in 2026, with cash effects instead expected in 2027. He did not endorse an analyst estimate for high three-digit-million-euro annual savings beginning in 2028, saying the company could provide more clarity at its capital markets day at the end of September.

The CFO reaffirmed BMW’s 8% to 10% strategic EBIT margin target. “With respect of the current situation, we have to do more than maybe we expected 12 months ago,” Mertl said, adding that the company is intensifying and accelerating efficiency measures.

China Business Remains Profitable

China remained a major topic of discussion. Nedeljković said BMW’s production network in Europe, the U.S. and South Africa is balanced and well utilized, while China has been the exception. BMW has installed capacity at a newer Chinese facility that has not yet been ramped to full output, he said.

However, the company does not see a need to reduce installed facilities in China. Nedeljković said current volumes are appropriate for the number of employees in the country and preserve capacity for future growth. Mertl added that unutilized potential capacity does not carry the same cost burden as fully operating capacity, and said depreciation levels in China differ from those outside the market.

Mertl said BMW’s Chinese joint venture remained profitable in the second quarter, although profitability was lower than a year earlier. He also said BMW’s China operations involving parts and imported vehicles were profitable at the group level.

BMW has already taken cost actions in China, Mertl said, though those savings do not offset lower contribution margins in the market. On asset values, he said BMW performs quarterly impairment tests and does not currently fail those tests. The company continues to record ordinary amortization of purchase price allocation related to its increased stake in the Chinese joint venture, which is scheduled to end in mid-2028.

Nedeljković said BMW has high expectations for the iX3 launch in China at the end of the fourth quarter, which he said should have an effect in 2027. The company declined to provide broader guidance on China or its profit and loss outlook for 2027.

European Supply Chain and Manufacturing Plans

BMW does not plan to make dramatic changes to its European manufacturing footprint, Nedeljković said. Instead, the company intends to make better use of existing assets and increase supplier localization around its Debrecen, Hungary, plant.

He said longer-term supplier contracts could help both BMW and suppliers identify common standards and reduce manufacturing costs. Localizing more suppliers near Debrecen could support the plant as well as BMW’s wider European and German operations.

Nedeljković said BMW reduced all-in cost per unit by 25% over the past five years at its Regensburg and Dingolfing plants. He defined the metric as total plant expenses—including labor, energy, supplies and depreciation—divided by unit volume.

Capital Spending, Cash Flow and Market Risks

Mertl said BMW continues to target research and development spending of between 4% and 5% over the long term, with capital expenditure below 5%. He said there is no plan to raise those targets after the investment period associated with the Neue Klasse rollout.

The company expects foreign exchange and commodity costs to remain a headwind in the second half compared with the prior-year period, with commodities expected to be the larger factor. Mertl said commodity prices were largely neutral in the first half versus the previous year, but elevated prices and limits to hedging could pressure the second half.

On free cash flow, Mertl said interest and accrual-related items in the “other” category may be subject to timing effects in the second half. He added that BMW expects to unwind working-capital pressure seen in the second quarter and expects capital expenditures to remain below depreciation in both the third and fourth quarters.

BMW also said residual-value trends remain less favorable than a year earlier, though conditions vary by market. Mertl pointed to better-than-expected recent trends for electric vehicles in the U.S., while citing pressure in the U.K. from the country’s zero-emission vehicle requirements. The company evaluates residual values by individual model and reassesses its portfolio quarterly.

Looking ahead, Nedeljković said growth remains important but is not an objective in itself. He said BMW expects its upcoming 40 derivatives to support growth potential despite regional headwinds, particularly in China.

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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