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Investing.com -- S&P Global Ratings has revised BMW (ETR:BMWG)’s outlook to negative while affirming its ’A/A-1’ ratings, citing challenging market conditions in China and tariff pressures.
The German automaker reported a 13.7% year-on-year decline in Chinese sales during the second quarter of 2025, following a 17% drop in the first quarter. China represents nearly 30% of BMW’s global sales.
S&P expects BMW to face continued competitive pressure from Chinese domestic manufacturers in the second half of 2025, as companies like Xiaomi (OTC:XIACF), Xpeng (NYSE:XPEV), and Li Auto (NASDAQ:LI) introduce new electric models with attractive features. The rating agency forecasts a mid-single-digit percentage decrease in BMW’s China sales this year, followed by a modest decline next year.
BMW’s battery electric vehicle market share is eroding in China despite being among the top-selling BEV brands in Europe. The Mini brand, however, is showing positive momentum with its refreshed electric model range.
The automaker’s 5%-7% automotive operating margin guidance assumes tariff de-escalation on imports from Mexico and Canada, as well as on steel and aluminum imports into the U.S. S&P estimates tariff headwinds as high as €1.5 billion for the nine months in 2025 and approximately €1.8 billion in 2026 before mitigating measures.
The recent EU-U.S. tariff deal provides some relief, allowing BMW to import its X-family vehicles produced in the U.S. into the EU at 0% tariffs, compared to 10% previously.
S&P expects BMW’s adjusted EBITDA margins to remain below 11% in 2025 and 2026, with recovery anticipated no earlier than 2027. The rating agency could lower BMW’s rating if the company fails to improve profitability and cash flows, particularly if it cannot defend its 3% market share in China.
A revision to stable outlook would require BMW to stabilize its market position in China and successfully implement its Neue Klasse architecture and other cost optimization initiatives, allowing EBITDA margin to recover above 11%.
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