BMW AG’s earnings declined in the second quarter on waning sales in its key China market, where the German company joins a growing list of automakers struggling with a demand slowdown.

The manufacturer’s automaking Ebit margin came in at 8.4% - below the 9.2% in the same period last year and missing analyst projections. The shares fell the most since May.

Carmakers are grappling with weak economic growth, persistent inflation and waning electric-car sales in Europe. A protracted recovery in China is adding to the woes, with Mercedes-Benz Group AG trimming the upper range of its annual margin forecast last week. Results at Stellantis NV, Nissan Motor Co and Ford Motor Co also missed expectations.

“In China, in particular, revenues were impacted by heightened competition and weaker consumer sentiment,” BMW said on Thursday. The carmaker still confirmed its guidance for the full year.

BMW’s vehicle deliveries in the world’s biggest auto market declined 4.7% in the second quarter, with a real estate crisis weighing on spending. The slowdown in China is affecting demand for a broad range of premium items including cars, watches and designer clothing. 

BMW is increasing prices across its line-up and reducing sales targets for dealers in the country to escape a bruising price war, and on Thursday said it expects the economic situation there to stabilize starting in the current quarter.

Higher manufacturing and personnel spending as well as the cost of information technology projects weighed on earnings, BMW said. The group’s second-quarter net income fell to €2.7 billion (US$2.9 billion or RM13.3 billion). Group revenues, profit before tax and earnings before interest and tax also declined. The auto margin in the period came in at the lower end of the 8% to 10% range BMW is targeting for the full year.

BMW shares declined as much as 4.9% in Frankfurt, the steepest intraday drop since May 16. The stock is down around 19% this year.

The carmaker did have success selling electric vehicles (EVs). Its global deliveries of battery-powered models such as the i4 and iX1 surged by more than a fifth in the second quarter, beating rivals Mercedes-Benz and Audi. The company cited its attractive product portfolio for the rise in a challenging market.

BMW is betting on fresh momentum from its Neue Klasse generation of EVs, with sales slated to begin in late 2025. In the first half of this year, the company’s research and development spending - including on the new platform - jumped to €4.2 billion.

With Neue Klasse, BMW aims to slash battery costs in half from current levels and increase driving ranges by around 30%. The vehicles will allow for bi-directional charging, which enables buyers to use them as a backup battery at home.

The new EVs “will raise BMW to a completely new technological level”, chief executive officer Oliver Zipse said in a statement.

  - Bloomberg