Domestically produced Neue Klasse iX3 is about to be delivered, yet BMW has already cut its profit expectations first.
On November 3, BMW Group lowered its automotive segment margin forecast for the second time this year. The company now expects the automotive segment EBIT margin in 2026 to fall between negative 0.5% and positive 0.5%, compared with its previous forecast of 1% to 3%. Some older models are being discontinued ahead of schedule, and organizational restructuring will also accelerate, with related costs to be booked in the fourth quarter.
The third-quarter report released on November 4 showed that BMW's automotive segment EBIT margin for the quarter was 3.4%, down 1.8 percentage points from the same period last year. BMW estimates that this round of adjustments will drag down the full-year automotive segment margin by about 2.5 percentage points. Excluding this impact, the full-year margin is still expected to remain above 2%.
BMW is bearing costs in advance for a new product cycle. But in China, the sales base supporting the model changeover is also shrinking. In the first three quarters, combined BMW and MINI deliveries fell 21.8% year on year, and growth in Europe and the United States was not enough to fill the gap. The Neue Klasse is therefore being counted on for dual expectations: it must attract customers and also improve the profitability of electric vehicles.
The domestically produced iX3, which opened for pre-orders in August, is scheduled for delivery in November, starting at 269,900 yuan, with nationwide unified pricing. From pricing to sales methods, BMW is adjusting the way it competes in the Chinese market.
The recovery timetable BMW itself has given is not short either: it targets an automotive segment margin of 3% to 5% in 2028. The domestically produced Neue Klasse iX3 has little time left to contribute to this year's China business, and the impact of scaled deliveries on sales and profit will be more fully reflected next year.
01 China's sales gap is hard to fill
BMW's two guidance cuts this year have each exposed pressure in operations and transformation.
In June, the company lowered its automotive segment margin forecast from 4% to 6% down to 1% to 3%, explicitly pointing to intensifying competition in the Chinese market and saying that sales growth in Europe and the United States could not offset declines in China and the Asia-Pacific market. Pressure on energy costs and consumer confidence from Middle East conflicts also exceeded previous expectations.
Sales data since then has not changed this situation. In the first three quarters, BMW and MINI delivered about 376,100 vehicles in China, down 21.8% year on year, while Europe and the United States grew 4.5% and 3.4%, respectively. Based on BMW's disclosed sales and year-on-year growth rates, the Chinese market decreased by about 105,000 vehicles from a year earlier, while Europe and the United States together added about 42,000 vehicles. China's shortfall is clearly larger than the combined increase in those two markets.
The problem is not only volume. In its outlook at the start of the year, BMW also warned that pricing and product measures taken to stabilize transaction prices in China would have a negative impact on this year's performance, especially in the first half.
At the same time, factors such as higher depreciation and a lower capitalization rate for research and development spending will also weigh on automotive segment profit. This means that even if the sales decline narrows, profit recovery will still require improvement in pricing and expenses.
This November downgrade is related to plant arrangements for the model changeover. BMW said that demand for the Neue Klasse prompted the company to add production shifts earlier, allowing it to phase out some models using fifth-generation battery technology sooner; organizational restructuring will also accelerate, including streamlining management functions.
Accelerating the changeover has its rationale: continuing to maintain older models and older technology requires development, procurement, and production resources; shifting resources to new products earlier helps reduce duplicate investment. But exit costs occur first, while the cost-reduction benefits of new vehicles are released gradually with delivery scale. When the existing business is already weakening in profitability, this time lag becomes even more conspicuous.
The scope of BMW's planned contraction has already gone beyond personnel costs. At its Capital Markets Day at the end of September, the company announced it would review and reduce model variants, and models such as the 2 Series Active Tourer will not get successor products. In China, BMW plans to expand local production of high-volume models, while imports will focus on the highest-margin models.
This shows that BMW is reallocating investment: products with a larger sales base will rely on localization to improve competitiveness, the import business will emphasize per-unit returns, and other products will face stricter input-output assessment. The Neue Klasse therefore carries not only the task of adding a few electric vehicles, but also of helping BMW maintain market coverage with more concentrated product investment.
Peers are undergoing similar adjustments.
Mercedes-Benz's automotive segment adjusted return on sales was 2.5% in the third quarter, compared with 4.8% a year earlier, with intensifying competition in China dragging on performance; Audi adjusted its full-year operating margin forecast at the end of October to 3% to 5%, also citing deterioration in the Chinese market environment and pricing pressure. German luxury automakers face a common profitability challenge, with a new round of product investment coinciding with declining returns from the existing business.
BMW still maintains its forecast for full-year automotive segment free cash flow of more than 2.5 billion euros, so the transformation still has financial support.
However, the target announced at the end of September is to restore the automotive segment margin to 3% to 5% by 2028, and then return to 8% to 10% in the early part of the next decade. Under this timetable, profit recovery will span multiple product years.
Neue Klasse deliveries are only the beginning. Whether model simplification, local procurement, and organizational adjustments can continuously reduce costs will also determine the speed of recovery.
02 The income statement still needs improvement
BMW is counting on the Neue Klasse to gradually narrow the margin gap between battery electric vehicles and internal combustion engine vehicles. Batteries are one of the biggest items in that calculation.
According to BMW's target, under comparable battery electric driving range conditions, the cost reduction target for the sixth-generation high-voltage battery compared with the fifth generation is 40% to 50%, which the company sees as an important factor in driving convergence between the margins of battery electric and internal combustion engine models.
For electric vehicles facing competition in both price and equipment, this reduction can provide important room. But how the cost savings are ultimately allocated will be decided by the market: part will be used for more range and features, part for more competitive pricing, and only the remainder may improve profit.
The domestically produced iX3 already reflects this trade-off. The entry-level 30L starts at 269,900 yuan and uses a 77 kWh lithium iron phosphate battery; the 40L and 50L start at 299,900 yuan and 339,900 yuan, respectively, and use large cylindrical batteries of different capacities. The three versions are priced apart through battery and powertrain configurations, balancing entry-level demand and higher-performance demand.
Therefore, the cost-reduction target of the sixth-generation battery pack cannot be directly applied to every domestically produced iX3, let alone equated with a proportional decline in whole-vehicle costs. Actual profitability will also depend on the sales mix of each version and whether consumers are willing to pay the difference for higher configurations. Entry-level models can expand the customer base, while whether higher-trim models can generate sufficient sales will affect the revenue structure of the entire model line.
Local manufacturing is providing support for this product lineup. On October 15, BMW announced that sixth-generation high-voltage battery production had begun in Shenyang to supply Neue Klasse models produced in China. Producing batteries and complete vehicles together locally helps shorten the supply chain. As deliveries increase, production efficiency and the sharing of common investment can be further reflected in costs.
On the demand side, the new iX3 received more than 100,000 new orders in Europe within a year, proving that the new product is attractive.
The Chinese market, however, has different competitive conditions. A senior automotive industry analyst told Wallstreetcn that the advantages of Chinese automakers have extended to development speed, cost competitiveness, and organizational agility, especially in intelligent connected vehicles. BMW's technology changeover needs to keep pace with the update speed of local products in order to maintain competitiveness at launch.
The nationwide unified pricing of the domestically produced iX3 is another change worth watching. BMW made it clear that the pre-order price is consistent with the launch price, and that the prices of the bare vehicle and options are unified nationwide. This helps reduce repeated bargaining during the car-buying process and is also an effort to encourage users to make purchase decisions earlier rather than waiting for terminal discounts. The analyst believes this is also a sign that BMW is learning from its peers in China.
But a price commitment must be sustained by supply and demand. After delivery scale expands, if orders can still grow steadily, BMW will have a chance to retain more of the cost-reduction benefits; if sales are mainly driven by additional purchase benefits and financial support, the room created by lower costs may still be consumed by sales spending. To observe the profitability of the Neue Klasse, changes in transaction prices and promotional spending should be viewed together with delivery volumes.
This is also the most difficult step in BMW's transformation in China. New technology can help it build lower-cost electric vehicles, but it cannot determine prices on its own. The fiercer market competition becomes, the more likely cost reductions will first be used to maintain product appeal. BMW needs to prove that its brand, driving experience, and localized product capabilities are enough to keep customers buying continuously at relatively stable prices.
The upcoming delivery arrangements will gradually provide the answer.
The domestically produced Neue Klasse iX3 is scheduled to begin deliveries in November, and the domestically produced Neue Klasse i3 is scheduled for delivery in the first quarter of 2027. Only when both models ramp up successively can the application scale of the new technology expand. For the Chinese market, the rest of this year is mainly about starting deliveries, while next year will depend on whether orders can continue and whether sales growth requires greater discount support.
If the new models' ramp-up is accompanied by a pullback in promotional spending, only then will the Neue Klasse begin improving both sales and profitability; if sales recovery still relies on continued concessions, what BMW gains will be more about time to stabilize the market. The pace of profit repair will ultimately depend on how much of the reduced cost remains on the income statement.
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