BMW profits plunge over a third; agreement reached with works council on job cuts

BMW is experiencing a sharp decline in profits, with earnings after taxes falling by 35% to 1.2 billion euros in the second quarter compared to the previous year. The company also reported a significant decrease in revenues, dropping from 34 billion to 31 billion euros.

These figures emerge just a day after the announcement of a job reduction program, underscoring the urgent need for the planned cost-saving measures. The situation is particularly stark within the automotive division, where earnings before interest and taxes (EBIT) plummeted by more than 60%. This dramatic drop has resulted in a peculiar scenario where BMW's financial services division generated more profit than its core car manufacturing operations during the quarter.

A primary contributor to this downturn is the company's performance in China, the world's largest automotive market. Once a consistent source of robust profits, China has become a challenging market for BMW and other German manufacturers. Intense competition has intensified, while sales have contracted significantly, with BMW sales in China falling by nearly a third in the second quarter.

Milan Nedeljković, who recently became BMW's CEO in mid-May, issued a warning about the increasing difficulties ahead. He anticipates that the company's business model will be shaped in the coming years by "fierce global competition, rising regulatory requirements, and the impact of geopolitical conflicts."

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Fierce global competition, rising regulatory requirements, and the impact of geopolitical conflicts will shape our business model in the coming years.