BMW shares plummet in Frankfurt following the downward revision of its guidance

A negative start to trading in Frankfurt for BMW in Frankfurt, following the announcement of a cut in profit forecasts for the current year and the need to accelerate the cost-cutting programme, in the wake of a decline in demand in China and the consequences of the conflict in the Middle East. The share price fell by as much as 9% at the opening of trading. The German car manufacturer now forecasts returns for its car division of between 1% and 3%, compared with the previous peak of 6%. The company has announced that it is prepared to expand its cost-cutting programme for the current year, with a consequent one-off negative impact in the second half of this year. The German manufacturer has not specified whether the plans include job cuts. The downward revision comes just one month into the tenure of the new CEO, Milan Nedeljkovic, who took over from Oliver Zipse in May. The former head of production is tasked with overseeing the development of BMW’s revamped electric range, known as the Neue Klasse, which has required billions of euros in investment.

However, the returns on this investment could, as mentioned, be hampered by weakening demand in China, BMW’s main market. The recent weakness in China had fuelled expectations of a profit warning, according to Jefferies, “but not a collapse in margins on such a scale”. BMW’s ADRs fell by as much as 6.9 per cent in New York, dragging down the ADRs of Mercedes, Volkswagen, Porsche and Renault as well. This “radical cut in profits” is seen by analysts as a “wake-up call for the automotive industry”, with analysts emphasising that all European premium manufacturers are currently out of the running in the compact car segment in China.