BMW bets on Neue Klasse EVs to revive growth in China after sales slump: report
News Summary
BMW's sales in China, its largest market, saw a significant 15.5% decline in the first half of 2025, grappling with intense local competition and a weakening property market. To counteract this slump, BMW is banking on its new all-electric Neue Klasse series, designed to reinvigorate growth by overhauling its product portfolio and enhancing competitiveness. BMW has unveiled the Neue Klasse iX3 electric SUV, slated for its China debut by mid-2026. CFO Walter Mertl expresses optimism, forecasting renewed growth in China as Neue Klasse models become more widely available. A key aspect of the strategy is reducing battery costs by 40-50% for these vehicles, aiming to boost profitability. The iX3 50 is anticipated to achieve margin parity with combustion engine vehicles as early as 2026. The company projects an automotive EBIT margin of 5-7% for 2025, with a long-term target of 8-10%. BMW also faces challenges in the U.S. due to high import tariffs, expected to shave 1.25 percentage points off its 2025 profit margin. However, an agreement between the U.S. and EU to eliminate tariffs on U.S. industrial products and reduce European car tariffs from 27.5% to 15%, retroactive to August 1, is expected to offer some relief.
Background
The global automotive industry is undergoing a critical transition towards electrification, a trend particularly pronounced in the Chinese market. China is not only the world's largest automotive market but also a hub for EV technology and manufacturing, where local brands like BYD, Nio, and Li Auto pose significant challenges to traditional international automakers with their cost advantages and rapid innovation. European luxury car brands, including BMW, have historically dominated the Chinese market. However, in recent years, they have struggled to effectively meet Chinese consumers' strong demand for intelligent and cost-effective EVs, leading to erosion of market share and sales. Furthermore, global geopolitical tensions, especially tariff policies between the United States and its key trading partners, continue to impact the automotive industry's supply chains and profitability, particularly for German automakers heavily reliant on cross-border production. Against this backdrop, BMW's launch of the "Neue Klasse" platform aims to recapture growth in the Chinese market and address global electrification and trade policy challenges through new electric models, lower battery costs, and localized strategies.
In-Depth AI Insights
Can BMW's "Neue Klasse" strategy truly address the structural challenges in the Chinese market, or is it merely a product iteration? - BMW management's optimism about "Neue Klasse" might underestimate the deep structural shifts in China's EV market. Chinese consumers' preferences have moved beyond traditional luxury brand allure towards intelligent experiences, rapid iteration capabilities, and cost-effectiveness. - Relying solely on a new platform and cost optimization may not suffice to close the gap in areas like software-defined vehicles, human-machine interaction, and data-driven services, which are core competencies of local Chinese brands. - Foreign brands in China face not just product challenges, but also competition in business models and ecosystems, including the depth and speed of collaboration with local tech giants, and adapting to unique Chinese consumer habits. Is the US-EU tariff agreement a short-term relief for BMW or a signal for long-term strategic adjustments? - In the short term, the tariff reduction from 27.5% to 15% will undoubtedly ease BMW's profit pressure in 2025, directly boosting margins on vehicles exported to the US. This reflects the Trump administration's pragmatic approach in specific trade areas. - However, it might also signal that the US will continue to use tariffs as leverage in global trade negotiations to extract concessions from allies, serving its "America First" industrial policies, especially regarding the protection of key manufacturing sectors. - For BMW, while it gains a reprieve, it should remain wary of future US trade policy uncertainties and might accelerate the diversification and regionalization of its global supply chains to mitigate geopolitical risks. Does BMW's sales slump in China foreshadow a "darkest hour" for European luxury brands in the world's largest EV market? - BMW's struggles in China are not isolated, reflecting the lagging pace of electrification transformation among most traditional European luxury brands. They face a dual challenge from Chinese domestic brands in terms of brand premium, technological innovation, and cost control. - If the "Neue Klasse" series fails to significantly boost sales and market share, it might force brands like BMW to re-evaluate their investment strategies in China, potentially considering deeper localization and cooperation, including equity partnerships, to share technology and market risks. - This could also accelerate the reverse penetration of Chinese EV brands into European markets, further squeezing the global market share of traditional luxury brands. The "success or failure" in the Chinese market will profoundly impact these brands' global strategies and valuations.