What Bayerische Motoren Werke Aktiengesellschaft (BMW) Said on Its Q3 Earnings Call

Key Points

• BMW is accelerating restructuring after strong employee uptake of its severance program, with much of the transformation potentially completed by mid-next year. The company raised the expected impact of its measures in the automotive business to 2.5 percentage points, from 1.25 previously.
• Demand for the Neue Klasse is supporting a faster EV transition: BMW reported more than 100,000 iX3 orders through December and is increasing production, including adding a third shift at its Debrecen plant.
• China remains a major headwind as BMW’s Q3 sales there fell 24.8% amid a contracting market, and its business is still heavily weighted toward combustion vehicles. BMW is targeting an automotive EBIT margin above 2% in the near term and 3%–5% in 2028.

Bayerische Motoren Werke Aktiengesellschaft ETR: BMW said it is accelerating structural and portfolio measures as it seeks to shorten the time needed to improve profitability, while ramping production of its Neue Klasse electric-vehicle lineup and responding to a sharp shift in China’s auto market.

During the question-and-answer portion of its earnings call, Chief Executive Officer Milan Nedeljković said strong employee interest in the company’s severance and restructuring program has allowed BMW to move faster than initially planned. The company had previously expected elements of its transformation to extend further into the future, but Nedeljković said implementation could largely be completed by the middle of next year.

“We see enormous potential which can be harvested in a very short amount of time,” Nedeljković said. “We can transform the company fast.”

Restructuring Program Gains Momentum

BMW executives described the measures as a combination of structural changes, personnel actions and portfolio decisions. Chief Financial Officer Walter Mertl said the faster implementation may require more input in certain periods, but should allow the company to benefit sooner from the resulting efficiency gains.

Mertl said BMW had expanded the expected impact of its measures to 2.5 percentage points in its automotive business, compared with 1.25 percentage points previously. He declined to provide a detailed breakdown between costs related to personnel measures and product portfolio actions.

The company also did not disclose the number of jobs affected or the size of its severance budget. Nedeljković said demand for the program exceeded the level planned within its budget, prompting BMW to conclude the program after roughly three weeks, aside from contracts still awaiting signatures.

According to Nedeljković, more than 90% of participating employees are likely to come from Munich, where BMW’s headquarters and research and development operations are located. The program was aimed primarily at indirect functions including management, development, purchasing and planning rather than factory operations, he said. BMW’s German plants are operating with strong capacity utilization, including as many as three shifts at some sites.

The restructuring is also intended to reduce organizational complexity. Nedeljković said BMW is consolidating units at the senior vice president level, with the aim of reducing interfaces among functions and creating a more process- and customer-oriented structure. He said the changes concern organizational segments rather than specific individuals.

Neue Klasse Demand Supports Faster Product Transition

BMW said customer interest in its Gen6-based Neue Klasse vehicles is supporting an earlier ramp-up of the new technology and a corresponding reduction in some Gen5 models. Nedeljković declined to identify the individual derivatives that could be phased down or withdrawn.

He said BMW had received more than 100,000 orders for the iX3 through December and described feedback on the Neue Klasse in Europe as positive. The company plans to launch new derivatives quarterly and said all are expected to be introduced by the end of next year.

BMW has added a third shift at its Debrecen plant to support higher output and is preparing to begin production in Mexico. Nedeljković said some model introductions in certain regions have been brought forward by several months, although the principal focus is expanding production volumes to meet demand.

The executives said the transition is not intended to limit customer choice or steer buyers toward internal-combustion vehicles. Nedeljković said customers are seeking the newer technology and that Gen5 production can be reduced as Gen6 models ramp up.

Mertl said BMW remains on track to meet European Union carbon-dioxide targets and cited a battery-electric vehicle share of 47%, rising to nearly 50% when hybrids are included, during the third quarter.

China Remains a Central Challenge and Opportunity

BMW said the June revision to its outlook reflected the rapid decline of the combustion-engine market in China. Nedeljković said the company had been surprised by the pace of the change, noting that the Chinese market for internal-combustion vehicles had fallen by nearly 40% at that time.

Mertl said China’s overall market was down 22% through September, matching BMW’s decline. During the third quarter, the overall market fell 24.6%, while BMW’s sales declined 24.8%, he said. BMW’s internal-combustion business in China was down 31%, compared with a 13% decline for its battery-electric business.

BMW currently has roughly 95% of its Chinese business in the internal-combustion segment, Mertl said, making the Neue Klasse launch particularly important to expand its presence in battery-electric vehicles. He said the company would begin sales of the iX3 in China at the end of the following week and then introduce additional products.

While acknowledging the growing importance of Chinese domestic brands, Mertl said BMW believes demand will depend primarily on the attractiveness of its products. He added that BMW does not believe the Chinese internal-combustion market will disappear, saying it should remain viable in certain price segments into the next decade.

BMW’s strategy in China remains largely “local for local,” Nedeljković said. The company plans to export BMW-branded vehicles from Shenyang mainly to Asia-Pacific markets, while MINI vehicles are exported to Europe. He said BMW does not currently plan to export China-built BMW models to other regions because product configurations, including long-wheelbase models, differ from those sold in Europe and the United States.

Profitability Targets and Other Business Initiatives

Mertl said BMW continues to target an automotive EBIT margin above 2% in the near term and is working toward a 3% to 5% margin in 2028. He said the new product portfolio and accelerated measures could support faster improvement, though BMW has not specified what portion of the recovery could be brought forward.

On artificial intelligence, Nedeljković said BMW has integrated AI applications into its processes and products for about a decade and sees potential to apply its capabilities beyond internal use. However, he said it was too early to discuss external customers or commercial arrangements.

BMW also said it would wait for further developments on trade discussions involving the United Kingdom and Europe before assessing the outlook. The company noted that the U.K. remains an important location but said it was too early to determine how negotiations would conclude.

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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