Sluggish China sales and trade tariffs increase headwind for BMW

Releasing its 2024 financial results, BMW’s net profit plummeted by over a third last year. The German automaker warns of continued headwinds from trade tariffs and sluggish demand in China. 

The Bavarian company reported a 36.9% drop in net profit to €7.68 billion ($8.32 billion), in line with market expectations and German competitors. However, geopolitical tensions and the changing behavior of Chinese customers weighed on performance.

€1 billion cost of tariffs

The automaker now projects an earnings margin for its core automotive segment between 5% and 7% in 2025, down from 6.3% last year. The forecast accounts for the trade barriers imposed as of March 12, including U.S. tariffs on steel and aluminum, a 20% levy on Chinese imports, and a 25% tariff on vehicles imported from Canada and Mexico. BMW said the impact of these duties could slash automotive earnings by roughly €1 billion this year.

During the earnings call, CEO Oliver Zipse criticized the resurgence of protectionist trade policies, calling these methods outdated and warning that tariffs could disrupt global supply chains and reduce competitiveness. “Everything is connected in today’s world. We will see a shift in attitude toward tariffs over the next 12 to 18 months,” he said on news channel CNBC on Friday.

Outlook might change

However, despite the concerns, the quote highlights that the BMW executive remains optimistic that the tariffs will not persist throughout the year. Over the United States, even Tesla is now warning about the adverse effects of these tariffs, while Elon Musk is one of Trump’s core advisors.

CFO Walter Mertl stood by Zipse’s side and affirmed that the company’s outlook would improve if trade conditions were revised. “If the situation changes, so does our outlook,” Mertl said during BMW’s earnings call. He added that the €1 billion hit to earnings was a conservative estimate, assuming that BMW would absorb the full cost of tariffs at current sales projections.

Weak China sales, delivery issues

Like its luxury rivals, BMW has relied heavily on China for sales growth over the past decade. However, the world’s largest auto market has become increasingly difficult for foreign automakers as homegrown electric vehicle manufacturers, such as BYD, continue to erode market share. Weaker consumer confidence in China has also hurt demand.

BMW’s global deliveries totaled approximately 2.45 million vehicles in 2024, a 4% decline from the previous year. The company largely attributed the drop to a recall of 1.5 million vehicles over faulty braking systems supplied by Continental. The mishap forced BMW to lower its full-year outlook last year while it messed up production schedules. 

Rare bright spot

China’s struggles, combined with softer demand in Germany, led to the 41% drop in BMW’s fourth-quarter profit, the company’s weakest performance in four years. A rare bright spot came from BMW’s electric vehicle sales.

The automaker delivered 426,536 of those, a 14% year-over-year increase, outpacing Mercedes-Benz, whose EV sales tumbled nearly 25% during the same period. Electric cars now account for 17% of BMW’s total sales, with plug-in hybrids pushing total electrified vehicle sales to nearly 25% of the mix. 

The company is in complete preparation to launch its next-generation EVs under the Neue Klasse platform, with the official debut of the iX3 scheduled for the IAA Mobility auto show in Munich this September. “No other manufacturer has a project as ambitious and ground-breaking as ours about to enter production,” concluded Zipse.