German Automakers Skid on China Slowdown, Tariff Fears
BMW slumps after cutting its 2025 forecast, signaling widespread pressure for the automotive sector from economic headwinds.
The European automotive sector is flashing warning signs as German auto giant BMW saw its stock fall nearly 6% after lowering its 2025 earnings forecast. The company pointed to a persistent and the impact of U.S. import tariffs as significant headwinds, raising concerns about the health of the entire industry.
The challenges are not unique to BMW. Rival Mercedes-Benz has also been severely impacted, with its own due to weakening demand in China. Both luxury carmakers are facing fierce competition from a surge in local electric vehicle (EV) manufacturers and cautious consumer spending amid a broader economic downturn in the region.
BMW's sales in China, a critical market for profitability, have seen a significant decline. The company reported a 14% drop in sales for 2024, with the negative trend accelerating into 2025. This downturn, as highlighted in the company's revised guidance, reflects deep-seated issues that are unlikely to resolve quickly. The situation has forced automakers to recalibrate their strategies, with to protect its margins.
Compounding the demand issues in Asia are ongoing trade tensions. U.S. import tariffs continue to weigh on profitability, disrupting supply chains and adding significant costs. BMW had previously warned that new tariffs could erase as much as 1 billion euros from its earnings. The combined pressure from slowing sales and rising costs creates a challenging outlook for automakers, suggesting potential for further volatility across the sector.