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

BMW is confident its new all-electric Neue Klasse series, spearheaded by the iX3 launching in China by summer 2026, will reverse a 15.5% H1 2025 sales slump in its largest market. CFO Walter Mertl highlighted 40-50% cheaper batteries enabling margin parity with combustion engines by 2026 and an automotive EBIT margin target of 8-10% in the future, up from 5-7% in 2025. Despite this strategic shift, US import tariffs are projected to reduce 2025 profit margins by 1.25 percentage points, though a potential EU-US tariff deal offers some mitigation.

Analysis

BMW is strategically pivoting to address a significant 15.5% sales slump in H1 2025 within its largest market, China, through the launch of its all-electric 'Neue Klasse' series. Management expresses confidence that this portfolio overhaul, led by the iX3 model launching in China by summer 2026, will reignite growth despite aggressive local competition. The financial viability of this strategy is underpinned by a 40-50% reduction in battery costs for the new vehicles, which the CFO states will enable margin parity with combustion engine models by 2026. This is a critical factor in the company's plan to elevate its automotive EBIT margin from a projected 5-7% in 2025 to a future target of 8-10%. However, near-term profitability faces a quantifiable headwind, with US import tariffs expected to reduce the 2025 profit margin by 1.25 percentage points, though a potential EU-US tariff deal could mitigate this pressure.

Key Decisions for Investors

• Investors with a long-term horizon should evaluate BMW's execution on the Neue Klasse rollout, as its success is positioned as the primary catalyst for reversing sales declines in China and achieving the targeted 8-10% EBIT margin.
• It is prudent to monitor near-term margin pressure, given the company's guidance for a 5-7% EBIT margin in 2025 and the quantified 1.25 percentage point impact from US tariffs, which create a potential trough before the new models' benefits are realized.
• Consider the timeline of the turnaround, as the key iX3 model will not launch in China until summer 2026, suggesting that financial improvements from this specific initiative are not immediate and require patience through potential near-term volatility.