Bernstein has reduced its price target for BMW (ETR: BMWG) to €85 from €108 but maintained an Outperform rating, pointing to a softer outlook in China and trimmed profit expectations as the rationale for the change.
The analysts adjusted their model after BMW lowered its 2026 guidance this month. Automotive EBIT margin expectations were scaled back to a 1% - 3% range from a prior 4% - 6% band, while automotive free cash flow forecasts were cut to more than €2.5 billion from a previous projection of more than €4.5 billion.
China is singled out as the primary worry. Bernstein now projects BMW’s sales in China will fall 13% this year and then decline another 10% in 2027, following a sharp pullback over the past two years. That weaker regional picture pushes the firm’s forecast for global vehicle deliveries down to a 2.5% decline in 2026, versus an earlier expectation of a 1.6% decline.
Those demand revisions have a material near-term impact. The weaker outlook for sales and margins prompted about a 30% reduction in the group EBIT forecast for 2026. Bernstein’s revised schedule for automotive EBIT margins shows a gradual recovery from 3.0% in 2026 to 4.0% in 2027 and 6.1% in 2028.
To reflect rising competitive pressure in China, the analysts increased the valuation discount applied to BMW to 30% from 20%.
Bernstein attributes roughly two-thirds of BMW’s guidance reduction to deteriorating market conditions in China and other Asia-Pacific markets. The remainder stems from restructuring and cost-optimization actions that the firm expects to be recorded in the second half of 2026.
Market attention is turning toward BMW’s capital markets day, scheduled for late September. Investors will be looking for concrete detail from management on how the company plans to restore automotive margins to its long-term target range of 8% - 10% and how future capital returns will be managed.
Despite the weaker short-term outlook, the report retains a constructive long-term stance anchored on BMW’s Neue Klasse vehicle architecture. Bernstein highlights the next-generation platform as the key lever for future margin expansion and cost savings as production ramps up under new Chief Executive Milan Nedeljković.
Contextual note - The analyst changes follow BMW’s own downward revision of 2026 guidance and reflect updated assumptions on China demand, margin recovery timing, and cash flow generation. The Neue Klasse rollout is presented as the structural path to improved profitability once production and scale effects accelerate.