Bayerische Motoren Werke Aktiengesellschaft Q4 Earnings Call Highlights

Bayerische Motoren Werke Aktiengesellschaft ETR: BMW executives used the company’s 2026 annual analyst and investor call to emphasize what they described as the resilience of BMW’s global business model, while outlining assumptions behind 2026 guidance that includes tariff relief in the second half of the year and a lower capitalization ratio for R&D as Neue Klasse launches ramp.

Management highlights strategy and leadership transition

CEO Oliver Zipse, whose tenure is nearing its end, told analysts that being “anti-consensual” can be an advantage in a highly competitive industry. He said BMW’s approach has been to become “antifragile,” describing it as the ability to profit from a volatile environment.

Zipse outlined three components he said underpin that approach:

• Global scale: He noted BMW has been “shrinking in China,” but said the company has overcompensated with growth in Europe, the U.S., and other regions.
• Technology openness: Zipse said technology neutrality enables BMW to respond quickly to differing market demand, pointing to varying rates of electrification across countries.
• Broad portfolio: He said BMW offers vehicles across segments and drivetrains, from MINI through high-end models, including Rolls-Royce and upcoming Alpina additions.

Zipse also emphasized flexibility developed through disruptions such as the pandemic and supply chain crises. He said incoming CEO Milan Nedeljković has been involved in strategy throughout and suggested “you probably won’t even feel that there is a change in top leadership.”

Tariffs: 2026 guidance assumes improvement in the second half

CFO Walter Mertl addressed multiple questions about tariff assumptions embedded in 2026 guidance. He said tariff impacts fluctuated in 2025, referencing hits to EBIT margin that varied by quarter. For 2026, he said BMW assumes “changes for the better” in the second half, including an agreement that would reduce the EU-U.S. tariff burden to “nil from the second half year onwards.”

Mertl also said the company assumes “better negotiation” outcomes involving the U.S., Mexico, and Canada. Under those assumptions, he said BMW expects a roughly 1.25 percentage point tariff burden on the EBIT margin for 2026, compared with about 1.5 points in 2025, emphasizing it is “instead of” rather than additive to the prior year’s impact.

Pressed on why BMW is including tariff easing in guidance, Mertl said management is working on measures that could help compensate if assumptions prove incorrect, citing 2025 as an example when the company “found measures” after tariff costs increased beyond what it had initially built into expectations.

Key 2026 bridge items: CapEx, R&D, activation ratio and depreciation

Mertl said BMW is targeting reductions across several cost lines in 2026, including CapEx, R&D (under German commercial law), and fixed costs such as SG&A. He also highlighted headwinds related to the Neue Klasse industrialization.

Among the key items he flagged:

• Depreciation: With the “real start of production” for Neue Klasse, Mertl said depreciation would rise across 2026, after only limited effects seen in Q4.
• Lower R&D capitalization: Mertl said the activation of development costs ends six months after start of production, which he expects to push down the capitalization ratio. He said BMW assumes an R&D capitalization ratio of around 30% in 2026, versus 41% in 2025, which he described as an additional burden.

He said these factors contribute to guidance for the automobile segment EBIT margin of 4% to 6%, down from a 5% to 7% corridor referenced for the prior year.

At the group level, Mertl said BMW is guiding for a “moderate decline,” which he defined as 10% to 15% below the previous year, while noting 2025 group profit exceeded €10 billion.

China: “Normalization,” local content, and pricing stabilization

Zipse described China as the world’s largest car market and said heightened competition there should not be a surprise. He characterized recent developments as a “normalizing” of a saturated market, similar to Europe and the U.S., and warned against expecting above-average profitability in that environment.

He said the Neue Klasse iX3 has received strong feedback and will be offered in China in a long-wheelbase version. Zipse said BMW is collaborating with local supply chains and named Chinese technology partners including Alibaba, Huawei, and Momenta. He also referenced local production in Shenyang and said the vehicle would be presented at the Beijing Auto Show next month. Looking ahead, he said Chinese content in BMW vehicles is expected to rise further and that BMW is aligning with that trend.

Mertl, responding to concerns that China assumptions could be too optimistic, said BMW has seen dealer network stabilization and pointed to measures launched starting in November and again in February to enhance product attractiveness and support transaction prices. He also said transaction prices had stabilized and “even” improved in recent months. He cautioned against interpreting January and February sales without considering the timing of Chinese New Year, and said the company believes it “can achieve” the previous year’s level in China based on run-rate trends, while acknowledging that a sharp downturn would create a different scenario.

Sales model shift: “The New Retail” and financial services dynamics

On the sales side, Zipse outlined the strategic rationale for “The New Retail” (TNR), BMW’s move toward direct sales in Europe. He framed the shift around understanding customers at an individual level, arguing that future customer insight will rely heavily on AI capabilities and that BMW’s MINI brand has already provided positive learning experiences from TNR implementation in Europe.

Mertl said the move is expected to have positive financial implications through greater pricing stability across online and offline channels, improved ability to present transaction pricing, potential upselling opportunities, and centralized stock management that could reduce pipeline inventory and associated price pressure. He said the company is preparing IT systems and rolling out changes step by step.

Separately, Mertl discussed financial services impacts tied to U.S. EV leasing trends. He said U.S. leasing penetration is among BMW’s highest globally and noted that BEV leasing had been elevated due to subsidies. After changes effective October 1, he said BEV sales and leasing penetration declined in the U.S., which affected consolidation and eliminations within the group structure. He also described BMW’s approach to residual value management, including setting residual values at contract start and conducting quarterly portfolio re-evaluations, with adjustments reflected via residual value provisions.

On cash flow and tariff refunds, Mertl said BMW reassessed certain receivables in November and now expects a “mid three-digit million euro” level rather than a higher figure previously assumed. Regarding U.S. processes, he said BMW submitted claims covering April 2025 to March 2026 related to a 3.75% discount mechanism, and that the company’s assumption is it will effectively pay tariffs net, rather than receiving cash refunds and paying gross amounts.

Finally, on shareholder returns, Mertl reiterated BMW’s payout framework of 30% to 40% and said exceeding automotive free cash flow was treated as an exception in 2025. He referenced that 2025 dividend proposals and buybacks would represent around €4 billion of cash out compared with €3.2 billion in automotive free cash flow, and said the current share buyback tranche is expected to run through August, with a third tranche already earmarked.

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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