BMW margins under pressure in Q2, but Deutsche Bank maintains Buy

Overview

This report is Deutsche Bank's preview of BMW's second-quarter 2026 results. The core view is that volume and pricing pressures will significantly weigh on automotive profitability, particularly given the pronounced decline in China; however, the Neue Klasse-related iX3 and i3 models remain the focus of considerable interest, and as guidance was recently adjusted, the report does not expect the company to revise full-year guidance again when it releases results on July 30.

Core views

The report maintains its Buy rating on BMW and EUR 90.00 target price. In the short term, Q2 automotive margin is expected to be only 1.2%, at the low end of the 1%-3% guidance range, reflecting adverse effects from lower volumes, weaker pricing, depreciation and amortization, raw material costs, and foreign exchange. Regarding cash flow, low profitability and working capital are expected to weigh on free cash flow, although it should remain positive and below Q1.

Analysis framework

The report primarily uses an earnings preview framework, breaking down volumes, regional mix, pricing, costs, foreign exchange, one-off refunds, and free cash flow, and comparing the expected results with the company's revised full-year guidance range.

Methodology notes

• Earnings previewVolume-price-margin bridge

  Assessing automotive margins through changes in volumes, the pricing environment, and cost factors.

  The report identifies the decline in Q2 retail sales, weakness in China, weaker pricing, depreciation and amortization, raw material costs, and FX headwinds as the main drivers of margin pressure.

• Guidance reviewComparison of earnings expectations with company guidance

  Comparing forecast margins and cash flow with the company's guidance range.

  The report expects automotive EBIT margin to be at the low end of the 1%-3% range and believes that, as guidance was recently revised, no further near-term change should be expected.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BMWG.DE

  Stock of the company covered by the report

  Strengths

  Buy rating maintained; target price implies substantial upside to the current price; year-over-year sales growth in Europe and the Americas; continued recognition of momentum in Neue Klasse-related models.

  Weaknesses

  Q2 retail sales declined year over year; China declined 30% year over year; weaker pricing and cost pressures are weighing on automotive margins.

  Comparison

  Europe and the Americas performed significantly better than China; expected margin is at the low end of the company's 1%-3% guidance range.

  Risks

  If demand in China continues to deteriorate, pricing pressure intensifies, or raw material and FX headwinds widen, earnings and cash flow could fall further below expectations.

Key data

• Results release date2026-07-30BMW will release its Q2 results and hold a conference call.
• Q2 retail sales591k units, -5% YoYPrimarily driven by a 30% year-over-year decline in China.
• China sales-30% YoYThe report considers this the main reason for the decline in total Q2 sales.
• Europe sales+8% YoYRelatively resilient regional performance.
• Americas sales+10% YoYRelatively resilient regional performance.
• Expected automotive margin1.2%At the low end of the revised 1%-3% earnings guidance range.
• Automotive EBIT margin guidance1%-3%The report expects no further revision for now.
• Automotive free cash flow guidanceAbove €2.5bnThe report expects Q2 free cash flow to be positive but below Q1.
• IEEPA refund impactLow three-digit million euro positive contributionExpected to have a one-off positive impact on Q2.
• Target price and current priceTarget price EUR 90.00; current price EUR 58.14Current price as of 2026-07-10.

Impact & implications

For investors, the report conveys a combination of short-term earnings pressure and continued medium-term valuation appeal. The key focus of the Q2 results is not a guidance upgrade, but whether margins can remain within the revised range, whether free cash flow stays positive, and whether weakness in China spreads further to other regions.

Risks

• A sharp decline in China sales could continue to weigh on group sales and earnings.
• Weaker pricing could further compress automotive margins.
• Depreciation and amortization, raw material costs, and foreign exchange headwinds could exceed expectations.
• Low profitability and working capital movements could weaken free cash flow.
• If results fall below the 1%-3% margin guidance range, the market may reassess the credibility of full-year guidance.
• The report discloses that Deutsche Bank has investment banking and other service relationships with the company; potential conflicts of interest should be monitored.

What to watch

• Q2 results and management commentary on the July 30 conference call.
• Whether automotive EBIT margin is close to or below the 1.2% expectation.
• Whether full-year automotive EBIT margin guidance of 1%-3% is maintained.
• Whether automotive free cash flow remains positive and approaches the full-year target of above €2.5bn.
• Whether China sales and pricing trends improve.
• Order or demand momentum for Neue Klasse, iX3, and i3.