BMW (BMWYY:OTC), for one, has issued a bombshell fiscal update as we head into the second half of 2026. The company slashed its annual profit margin forecast from the 4-6% it initially predicted to just 1-3%. Ongoing repercussions from the military action in Iran and, crucially, waning demand in China were provided as the primary reasons for the change.
To cope, the carmaker is rolling out new cost-optimization measures, including cutting 5% of its workforce. Meanwhile, analysts at JPMorgan have called the cut “radical” and said it should serve as “a wake-up call” for the entire auto industry.
BMW’s shares hit a six-year low as a result of the news, surprising investors who thought the company was better positioned than other European luxury rivals due to its flexibility, resilience and historically strong profit margins.
BMW isn’t alone
This spring, executives at Toyota, Ford and Honda had to face the reality of China’s competitive edge. The CEO of Honda, Toshihiro Mibe, turned heads by saying his company had “no chance against” the level of automation that firms like Shenzhen-founded EV giant BYD have rapidly integrated into their operations.
In Germany, BMW and its peers, including Mercedes-Benz and Porsche, have watched profit margins fall from double-digits in 2021-2023 to between 1% (BMW) and 7.5% (Porsche) for 2026.
In the US, tariffs, the end of federal clean vehicle credits, inconsistent charging infrastructure and a lack of appealing low-cost models have slowed consumer adoption of non-fuel cars. At the same time, the tough economy has pushed new-car purchases down households’ priority lists.
Meanwhile in China, where the EV market is rife with domestic players and is especially cutthroat, rebate programs for the vehicles were also trimmed in 2026. That move dampened sales activity for the year after a late-2025 sales rush.
BMW shuttered one of its Chinese dealerships in March, reportedly due to poor sales. That followed the closure of more than 50 locations in the country in 2025.
Major pivots have led to losses
BMW saw stronger interest in its EVs than ever in 2025 and had aimed for EVs and hybrids to make up 50% of its sales by 2030. For comparison, those vehicles accounted for 18% of sales in 2024, a year when executives said the market had reached a “tipping point” of EV growth surpassing that of fuel models.
