BMW will return to growth in China with new all-electric series, CFO says

BMW is confident its new all-electric Neue Klasse series, led by the iX3 EV launching in China by summer 2026, will reverse a 15.5% H1 2025 sales decline in its largest market. CFO Walter Mertl highlighted that 40-50% cheaper batteries in these new models will enable margin parity with combustion engines by 2026, aiming to raise automotive EBIT margins to 8-10% from the 2025 target of 5-7%. However, US import tariffs are projected to reduce 2025 profit margins by 1.25 percentage points, despite hopes for a potential EU-US tariff reduction.

Analysis

BMW is confronting a significant 15.5% sales decline in China for the first half of 2025 by launching its all-electric 'Neue Klasse' platform, with management expressing confidence this will reignite growth. The strategy hinges on the Neue Klasse iX3, set to launch in China by summer 2026, and its cost-competitiveness, driven by battery costs that are 40-50% lower than those in existing models. This cost reduction is foundational to the company's forecast of achieving margin parity with its combustion engine vehicles by 2026. Financially, BMW is guiding for a 2025 automotive EBIT margin of 5-7%, with a long-term target of 8-10%. However, this outlook is materially impacted by a stated headwind from US import tariffs, which are projected to reduce the 2025 profit margin by 1.25 percentage points, introducing a notable near-term risk to profitability.

Key Decisions for Investors

• Investors should assess BMW's stock as a medium-term turnaround play, as the primary catalyst for reversing its 15.5% sales decline in China is the Neue Klasse launch, which is not scheduled until summer 2026.
• The achievement of EV-to-ICE margin parity in 2026 is a critical milestone to monitor, as it would validate the company's EV strategy and its ability to reach the long-term 8-10% EBIT margin target.
• Near-term financial models must incorporate the specified 1.25 percentage point margin erosion from US tariffs in 2025, while any positive developments in EU-US trade negotiations should be considered a potential upside risk to earnings.