BMW targets margin recovery with cuts and local production

BMW Plans Margin Recovery Through Local Production and Strategic Cuts

BMW's Strategy for Margin Recovery and Growth

By Christina Amann and Rachel More

Background: Challenges in China and Profit Warnings

MUNICH, Sept 30 (Reuters) - German premium carmaker BMW will set out plans for more local production as it seeks to rebuild margins after a series of profit warnings tied to weak performance in China, Bernstein analysts said on Wednesday.

BMW is due to unveil its strategy update later on Wednesday at a capital markets day for investors, but Bernstein outlined key elements of the plan in a note after meeting management.

The company's reputation for resilience was dealt a blow in June when it issued a shock profit warning, its third in just over three years linked to weakness in China. The setback underscored the challenges facing Europe's carmakers as they contend with falling sales in China and US tariffs.

Cost-Cutting Measures and Redundancy Programme

The Munich-based carmaker responded with a redundancy programme expected to affect about 8,000 jobs in Germany, joining Volkswagen and Mercedes-Benz in slashing costs.

BMW, whose shares have fallen more than a third over the past year to their lowest level in more than six years, is presenting its recovery plan at a two-day event in Munich and at its Gut Schwaerzenbach retreat in Bavaria.

Margin Targets and Strategic Initiatives

Mid-Term and Long-Term Margin Goals

Bernstein said BMW would set a mid-term margin target of 3% to 5% for its automotive division by 2028.

By the early 2030s, BMW would aim to restore margins to 8% to 10%, a sharp improvement from its most recent result of 2.3%.

Share in the company were trading 1.4% higher at 0744 GMT.

Growth Through Innovation and Product Expansion

"BMW understands the solution is not simply cost-cutting. It is also pursuing growth with innovative products," Bernstein analyst Stephen Reitman said, adding that the Neue Klasse range, led by the electric iX3 SUV, is central to the recovery plan.

Luxury and Performance Vehicle Expansion

BMW will confirm plans to launch a luxury SUV positioned above the X7 and expand its M and Alpina ranges from 2027 to strengthen its premium offering, Bernstein said.

A BMW spokesperson said details of its strategy would be announced later on Wednesday.

Investment in Local Production

German Production and Capacity Adjustments

Separately, BMW said it would invest about €2 billion ($2.3 billion) in German production of its next-generation 3 Series sports sedan.

According to Bernstein, BMW's European and US plants are fully utilised, with China "the main area requiring production adjustment and capacity flexibility".

($1 = 0.8811 euros)

(Reporting by Christina Amann and Rachel More. Additional reporting by Thomas Seythal, Editing by Ludwig Burger and Mark Potter)