The German luxury car manufacturer BMW has presented a restructuring plan focused on utilizing artificial intelligence, reducing administrative costs, and launching two new models. These steps are aimed at restoring investor confidence following a series of warnings about declining profits and a significant drop in share value.
Amid a situation where the European automotive industry faces weakening demand, increased competition from China, and US tariffs, BMW's reputation suffered in June when the company issued its third profit warning related to weak performance in China in less than three years.
In response to this situation, the company launched a reduction program that is expected to affect around 8,000 jobs in Germany. Thus, BMW is joining its competitors—Volkswagen and Mercedes-Benz—in cost-cutting measures.
BMW shares have fallen by more than a third over the past year, reaching their lowest level in more than six years. The recovery plan was presented during a two-day investor event held at the company's retreat in Gut Schwarzenbach, Bavaria, as well as at the Munich headquarters.
The company has set a medium-term margin target of 3-5% for its core automotive business by 2028. By the early 2030s, BMW plans to increase the margin to the range of 8-10%, up from 2.3% in the latest results. By mid-2027, the group intends to reduce divisions and associated management positions by one-fifth. It was stated that artificial intelligence will play a key role in optimizing company operations and accelerating decision-making.
New Product Strategy
The former head of production, who took over as CEO in May, emphasized that this program is not just a cost-saving initiative. The group is also adjusting its productivity in line with various trends in key markets. A budget electric vehicle for Europe is planned to be launched starting in 2028, along with the development of a new luxury SUV for wealthier consumers in the US.
In China, BMW intends to deepen production localization and rely more on local partners in technologies such as autonomous driving and integrated software. Furthermore, the company is exploring the possibility of exporting products from China to Southeast Asia. Nedelickovic added that despite growing difficulties, they have identified initial measures for repositioning and will implement them with strong momentum, acknowledging that they could not foresee such rapid transformation of the Chinese market, hence exercising caution in forecasts.
Western automakers have faced the trend of Chinese consumers rapidly shifting towards domestic brands, which has negatively impacted sales in the world's largest automotive market, which was long the main source of profit. This pressure has been intensified by US tariffs, although BMW is less exposed to this risk due to its plant in Spartanburg, South Carolina.