German luxury carmaker BMW has set out a comprehensive restructuring plan aimed at restoring investor confidence and reviving its fortunes. The plan, unveiled during a two-day investor event, centres on the implementation of artificial intelligence, management cuts, and the launch of two new models. This move comes as the company faces significant challenges, including weak demand in Europe, intense competition from Chinese manufacturers, and the impact of US tariffs.
BMW's reputation for stability took a hit in June when it issued its third profit warning in just over three years, linked to weak performance in China. The company's shares have fallen by more than a third over the past year to their lowest level in over six years. In response, BMW has initiated a redundancy programme expected to affect around 8,000 jobs in Germany, joining rivals Volkswagen and Mercedes-Benz in cutting costs.
As part of its recovery plan, BMW has set a medium-term target for margins in its core automotive business of 3% to 5% by 2028. The company aims to return to a margin range of 8% to 10% by the early 2030s, up from 2.3% in its latest results. By mid-2027, BMW plans to cut divisions and associated management roles by a fifth, with AI playing a central role in efforts to streamline the company and speed up decision-making.
AI will be instrumental in helping BMW "meet the increasingly fierce competition that will define this industry in the coming years," according to CEO Milan Nedeljković. The company is also adapting its product strategy to diverging trends in key markets, planning an entry-level electric vehicle for Europe from 2028 while targeting wealthier US consumers with a new luxury SUV.
In China, BMW plans to further localise production and rely more on local partners for technologies, including autonomous driving and integrated software. The company is also examining potential exports from China to Southeast Asia. This move comes as Western carmakers have seen Chinese consumers shift rapidly towards domestic brands, hurting sales in the world's largest auto market, a key profit driver for many years.
US tariffs have added to the pressure on Western carmakers, although BMW is less exposed than some rivals due to its plant in Spartanburg, South Carolina. The company is taking steps to reposition itself in the market, with Nedeljković stating that "under increasingly challenging conditions, we have defined initial measures to reposition ourselves and will implement them with strong momentum."
The launch of two new models and the implementation of AI are key components of BMW's plan to restore investor confidence and revive its fortunes. The company's ability to adapt to changing market conditions and increasing competition will be crucial in determining its future success. With a focus on streamlining the company and improving decision-making, BMW is taking steps to address the challenges it faces and return to a path of growth and profitability.
Key points
- BMW aims to cut divisions and associated management roles by a fifth by mid-2027.
- The company plans to launch an entry-level electric vehicle for Europe from 2028.
- BMW targets a margin range of 8% to 10% by the early 2030s.
