BMW slumps on lower forecast, Mercedes follows as tariffs and China slowdown hit automakers

[Advertising banners, flags of German concern BMW Group, Sales Office, concept Advertising and Marketing in Automotive Industry, Global Brands, Leadership and Innovations, Frankfurt - October 11, 2023]
Victor Golmer

BMW (OTCPK:BAMXF [https://seekingalpha.com/symbol/BAMXF]) (OTC:BMWKY [https://seekingalpha.com/symbol/BMWKY]) (BMW:CA [https://seekingalpha.com/symbol/BMW:CA]) shares fell nearly 6% on the Frankfurt stock exchange on Wednesday after the company lowered its 2025 earnings forecast, citing slow growth in China and U.S. import tariffs.

BMW said [https://seekingalpha.com/news/4502471-bmw-estimates-its-automotive-units-2025-ebit-margin-in-the-range-of-5-to-6] that its automotive segment's 2025 EBIT margin is now expected to be in the range of 5%-6%, compared to the guided corridor of 5%-7%.

Group earnings before tax are now expected to decline slightly, compared to the prior guidance of being on the same level as the previous year.

Western manufacturers are losing ground in China to homegrown rivals such as BYD (OTCPK:BYDDF [https://seekingalpha.com/symbol/BYDDF]) and Xiaomi (OTCPK:XIACF [https://seekingalpha.com/symbol/XIACF]), which are offering feature-packed EVs at low prices.

Local rival Mercedes (OTCPK:MBGAF [https://seekingalpha.com/symbol/MBGAF]), which on Tuesday reported [https://seekingalpha.com/news/4502397-mercedes-reports-decline-in-china-sales-during-third-quarter] declining sales, saw shares down 2.7% in early Frankfurt trade on Wednesday.

Carmakers are navigating tough competition on multiple fronts, and the challenges facing European automakers specifically continue to escalate as tariffs on imported cars into the U.S. amplify the existing struggle.

"We believe that, more important than the impact of tariffs, will be the firm’s ability to stabilise the volume momentum and pricing power in China in FY26, which will ultimately ensure the longer term competitiveness of the group," JPMorgan analysts said, as per reports.

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