BMW Earnings Drop on China Slump as Tariffs Cloud Outlook

BMW’s first-quarter results underscored the fragility of the global automotive sector, with a sharp profit decline driven by weakening demand in China and lingering uncertainty over U.S. tariffs. While the company’s electric vehicle (EV) sales surged, the 26.4% drop in net profit to €2.2 billion and a 7.8% revenue slide to €33.8 billion highlighted the growing challenges for luxury automakers in 2025.

China’s Demand Drought

China, BMW’s second-largest market, accounted for a significant portion of the earnings slump. Deliveries in the region fell due to intensifying competition and shifting consumer preferences, with luxury buyers increasingly drawn to local rivals like NIO and Li Auto. Electrified vehicles (including hybrids) made up 26.9% of global deliveries, while fully electric models surged 32.4% year-on-year—a bright spot amid broader weakness. Yet, this growth couldn’t offset the drag from China’s overall sales decline, which cut into both revenue and profit margins.

Tariffs and Trade Tensions

BMW’s CFO, Walter Mertl, emphasized that U.S. tariff policies cast a shadow over its outlook. The company projected a €1 billion earnings hit from tariffs but expressed hope that some increases would be temporary. This cautious stance contrasted with peers like Mercedes-Benz and Volkswagen, which withdrew their 2025 forecasts entirely.

While BMW’s shares rose 3% post-earnings—a reflection of its financial resilience—its peers fared worse. Mercedes reported a 43% profit drop to €1.7 billion, while Volkswagen’s net profit fell 41% to €2.2 billion. BMW’s automotive segment margin held at 6.9%, near the top of its guidance range, underscoring its cost discipline.

The EV Bet Pays Off—But Risks Remain

BMW’s commitment to EVs appears strategically sound. Electrified models now account for nearly a third of deliveries, and the company aims to boost this share further in 2025. However, the sector remains vulnerable to macroeconomic headwinds. The ifo Institute’s automotive sector business climate index remained in negative territory, signaling broader industry pessimism.

Outlook: Fragile Resilience

Despite the challenges, BMW reaffirmed its full-year targets: group earnings before tax to match 2024 levels, with an EBIT margin of 5.0–7.0% for its automotive division. The company’s confidence hinges on EV growth and cost controls, but geopolitical risks and supply chain disruptions could upend this optimism.

Conclusion

BMW’s Q1 results paint a picture of resilience amid turmoil. The automaker’s ability to maintain margins and EV momentum, even as China’s market sputters, suggests strategic strength. However, the lingering threat of tariffs and slowing global demand create critical risks. Investors should weigh the 32.4% EV sales growth and margin stability against the €1 billion tariff impact. For now, BMW’s disciplined approach and premium brand power position it to navigate 2025 better than peers—but the road ahead remains bumpy.

In a sector where uncertainty reigns, BMW’s results offer a nuanced balance: a profitable, if unsteady, path forward.