BMW AG has lowered its 2026 outlook heavily influenced by challenges in China, where the luxury automaker delivered 144,072 vehicles in the first quarter of 2026, comfortably ahead of the U.S. (90,883) and Germany (62,582). However, the company now slashed its automotive EBIT margin guidance to between 1% and 3%, down from 4% to 6% previously, with group profit before tax expected to decline significantly. BMW anticipates automotive free cash flow will exceed €2.5 billion (~$2.9 billion) while its dividend payout and share repurchase plans remain unchanged. The German luxury automaker now expects a marginal decrease in deliveries this year compared to previous expectations of moderate decline.
Volkswagen AG Chief Executive Officer Oliver Blume is coming under mounting pressure from shareholders to demonstrate that his overhaul is moving fast enough, as BMW AG's deep outlook cut adds to concerns over prospects for Germany's auto industry. At VW's annual meeting Thursday, investors will ask if efforts over the past three years of Blume's tenure are sufficient as China's electric-vehicle champions reorder the industry. According to reports from Moneycontrol, at stake is Europe's biggest carmaker's ability to finance its future and keep paying the dividends that help sustain its investor appeal.
Blume can point to some progress: development costs are falling, VW is leading EV sales in Europe and new models are reaching customers faster with fewer quality problems. However, VW is still grappling with US tariffs, a persistent weakness in China and its own complexity, prompting Blume to pursue additional reductions. As reported by Moneycontrol, BMW is succumbing to the same pressures that have hit VW and Mercedes-Benz Group AG, raising questions about the German luxury car business model and the longer-term viability of exporting vehicles from Europe's biggest economy.
China is the most acute concern, with car sales declining by more than a 20th in May, and demand for combustion-engine vehicles dropping nearly 40%. The deterioration prompted forecasters including the China Passenger Car Association to sharply downgrade their annual sales outlook. According to Moneycontrol, while German carmakers are churning out fresh products, steep discounting and more nimble local competitors risk leaving them priced out of the world's biggest passenger car market. Domestic brands like BYD, Xiaomi, and NIO now offer comparable technology and luxury at much lower prices, eroding demand for German vehicles and forcing luxury marques to work harder to maintain margins.
At VW, Blume has made significant changes including a plan to sell a marine engine unit that could be valued at €8 billion or more. Some 28,000 workers have already agreed to leave VW and the company has whittled down its production capacity from 12 million vehicles a year toward a more realistic 9 million. However, the problem persists that VW's former cash cows Audi and Porsche are especially exposed to President Donald Trump's tariffs as the brands import all of the cars they sell in the country. BMW is adapting to the drastic downturn in market conditions, with Chairman Milan Nedeljković expressing enthusiasm around the brand's new Neue Klasse lineup described as "the strongest BMW portfolio in history."
The pressure is not confined to China, with the same local champions that have eroded German automakers' position there muscling into Europe and setting up local production. VW's profitability gap is part of investor anxiety, with Blume targeting an operating return of 8% to 10% by 2030 to fund dividends as well as spending on EVs and software. The clearest expression of complexity is VW's product range, selling more than 150 models from budget Skodas to Porsche 911 sports cars across regions with sharply different demand profiles. For BMW, the challenge extends beyond China, with intensified competition across Asia-Pacific regions and additional pressure from the Middle East conflict affecting energy prices and cost structures.
