European carmakers face deeper China pressure as BMW cuts profit outlook

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European carmakers face China pressure

Highlights

BMW slashes its 2024 automotive operating profit outlook by about 60 percent due to intensifying sales and profitability pressure in China.
Porsche's China revenue drops by roughly two-thirds from 2022 to 2025, while Volkswagen's joint venture operating profit in China halves to 958 million euros last year.
Chinese carmakers grow their European market share from nearly zero in 2021 to just under 10 percent, escalating risks for local producers already running at only 70 percent capacity.

BMW warning highlights China sales squeeze

As reported by Financial Times, BMW cuts its forecast operating profit for its car business this year by about 60 per cent, with the main pressure coming from its difficulties in China. The warning adds to a broader deterioration across Europe’s car sector, where manufacturers that rely on premium conventional models are losing ground to cheaper, locally made electric vehicles.

That shift is reducing both sales and profitability. Porsche’s revenue from China falls by roughly two-thirds between 2022 and 2025, according to S&P Capital IQ, while Citigroup analysts say China once accounted for about half of operating profit at BMW and Mercedes-Benz in peak years. Volkswagen’s operating profit from its Chinese joint ventures almost halves last year to 958 million euros.

The pressure is worsening because China’s own car market is also shrinking as the economy weakens and subsidies are phased out. With EVs continuing to gain share, European automakers face a tighter market at the same time that Chinese rivals are left with more spare capacity to sell abroad.

European market faces capacity and competition risks

Chinese manufacturers increase their market share in Europe from almost nothing in 2021 to just under 10 per cent, according to Jefferies analysts. Although European carmakers’ sales recover somewhat this year with new lower-priced models, the region remains a low-growth market and offers limited room for aggressive new entrants without displacing local producers.

That matters because the industry is already operating at only about 70 per cent of production capacity, by S&P Global’s estimate, leaving fixed costs high relative to sales. Carmakers are also investing further in factories to produce EVs, making it harder to earn acceptable returns as additional risks, including U.S. tariffs and Middle East disruption, raise volatility.

The European Union is considering support measures such as “Made in Europe” rules for public procurement and access to subsidies to protect domestic suppliers and jobs. Automakers are also starting to explore limited co-operation with Chinese groups, including Stellantis’ discussions with Dongfeng on using spare capacity in France, as the sector searches for ways to adapt.

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