BMW Margin Falls to 5.4% on China Slump, Tariff Risks

BMW  reported a decline in profitability in 2Q25, driven by lower vehicle sales in China and higher costs related to US tariffs. The German automaker’s automotive operating margin fell to 5.4% for the quarter ending in June. While still within its full-year guidance and slightly above analyst expectations, the company noted that tariffs are expected to reduce its annual margin by 1.25 percentage points.

BMW reaffirmed its full-year forecast of maintaining at least a 5% automotive margin, making it one of the few European carmakers not to revise profit expectations this earnings season. In contrast, Porsche, Volkswagen (its parent company), and Mercedes-Benz Group all cut their outlooks last week, citing cost pressures stemming from the ongoing trade dispute with the United States.

“The company’s outlook also includes mitigation measures to absorb the impact of tariffs,” BMW said in a statement. The company operates its largest manufacturing plant in South Carolina and announced in April that it is evaluating additional shifts at the facility to scale up production.

BMW saw a 16% increase in electric vehicle (EV) sales during the first half of 2025, outperforming several peers in the battery transition. CEO Oliver Zipse said the company aims to sustain this momentum as it prepares to unveil the first model of its Neue Klasse EV lineup in September.

However, German automakers continue to lose market share in China, where domestic manufacturers—led by BYD—are intensifying pressure on pricing and volume. This increasingly competitive environment contributed to BMW’s weaker performance in the region.

A recent trade agreement between the European Union and the United States reduced tariffs on European auto imports to 15%, down from a previous rate of 27.5%, though still well above the 2.5% rate in place before recent US trade policy shifts. BMW acknowledged the adjustment but reaffirmed its strategy to address external cost pressures through operational changes and continued investment in EV development.