BMW forecasts lower profits in 2026 as tariffs pressure margins

08:50

By: Dakir Madiha

BMW forecasts lower profits in 2026 as tariffs pressure margins

BMW warned that profits will decline in 2026 as higher tariffs, currency shifts, and rising costs weigh on the German luxury carmaker’s profitability, even as the company bets on its next generation of electric vehicles to drive long term growth.

Speaking at its annual conference in Munich, the company said it expects a moderate decline in group earnings before tax this year. BMW reported that its pre tax profit fell 6.7 percent to 10.2 billion euros in 2025.

The company projected its automotive EBIT margin will range between 4 and 6 percent in 2026, compared with 5.3 percent last year. Higher tariffs alone are expected to cut about 1.25 percentage points from that margin.

Beyond trade barriers, BMW cited unfavorable currency movements, rising raw material costs, higher depreciation, and weaker income from the used car market as additional pressures on profitability. In China, tariff measures and pricing strategies designed to stabilize transaction prices are also expected to reduce margins, particularly during the first half of the year.

Vehicle deliveries are forecast to remain stable at around 2.46 million units, roughly matching 2025 levels. Sales in China, BMW’s largest market, dropped 12.5 percent last year, although stronger demand in Europe and the Americas helped offset part of the decline.

The company said strict cost management helped stabilize results in 2025. BMW reduced expenses by 2.5 billion euros through lower spending on research and development, production, and administrative operations. Chief financial officer Walter Mertl said the company will continue systematic cost reductions this year.

BMW proposed a dividend of 4.40 euros per ordinary share, up slightly from 4.30 euros the previous year. The payout ratio stands at 36.6 percent. Free cash flow from the automotive segment is expected to exceed 4.5 billion euros in 2026, compared with 3.2 billion euros in 2025.

To support future growth, BMW is accelerating the rollout of its Neue Klasse electric vehicle platform. The fully electric iX3, the first model built on the new architecture, has generated strong demand since launch. In Europe, one out of three preordered BMW electric vehicles is an iX3. The company’s Debrecen plant in Hungary has already moved to two shift operations to meet demand.

BMW plans to unveil a second model from the platform, the electric i3, next week in Munich.

The cautious outlook reflects broader pressures across Germany’s automotive industry. Competitors including Volkswagen, Porsche, and Mercedes Benz have also faced slowing demand in China and uncertainty linked to US trade policy.

BMW’s large manufacturing presence in the United States, anchored by its plant in Spartanburg, South Carolina, has partially reduced the impact of import tariffs. However, the company still faces European Union duties on its Mini electric models produced in China.

Chief executive Oliver Zipse said the company remains committed to its strategy despite the difficult environment.