Earnings call transcript: BMW Q2 2025 shows strong EV sales amid revenue dip

In its Q2 2025 earnings call, BMW Group highlighted robust electric vehicle sales but faced challenges with declining automotive revenues. According to InvestingPro data, the company’s revenue declined by 10.13% over the last twelve months, while maintaining a market capitalization of $59.3 billion. The company’s stock saw a slight dip of 0.69% following the announcement, reflecting mixed investor sentiment.

Key Takeaways

• BMW delivered 111,000 all-electric vehicles in Q2, marking a significant milestone.
• Automotive segment revenues fell by 8.4% in Q2.
• Tariffs impacted margins by approximately 2 percentage points.
• The company targets a full-year free cash flow of over 5 billion euros.
• BMW plans to launch 40 new or updated models by 2027.

Company Performance

BMW’s performance in Q2 2025 was marked by strong electric vehicle sales, with 111,000 all-electric vehicles delivered, contributing to a cumulative 1.5 million all-electric vehicles delivered to date. However, the automotive segment faced an 8.4% revenue decline, highlighting challenges in navigating tariffs and market conditions. InvestingPro analysis indicates the company operates with relatively weak gross profit margins of 14.22%, though it maintains its position as a prominent player in the Automobiles industry.

Financial Highlights

• Group earnings before tax: 5.7 billion euros in the first six months.
• Automotive segment EBIT: 1.6 billion euros in Q2.
• Automotive EBIT margin: 5.4% in Q2.
• Free cash flow in the automotive segment: 1.9 billion euros in Q2.

Market Reaction

BMW’s stock price fell by 0.69% following the earnings release, trading at 95.91, near its 52-week high of 104.66. According to InvestingPro analysis, the stock appears fairly valued at current levels, trading at an attractive P/E ratio of 7.63x. The company has demonstrated strong momentum with a 13.86% return over the past six months. For deeper insights into BMW’s valuation and 8 additional exclusive ProTips, consider exploring InvestingPro’s comprehensive analysis platform.

Outlook & Guidance

BMW is targeting group earnings before tax at the previous year’s level, with a slight increase in automotive deliveries. The company aims for an automotive EBIT margin of 5-7% and expects a tariff burden of approximately 1.25 percentage points on automotive EBIT. The launch of 40 new or updated models by 2027 is part of BMW’s strategic initiatives. InvestingPro data shows the company maintains a strong dividend tradition with 34 consecutive years of payments, currently yielding 5.1%. Access BMW’s detailed Pro Research Report, along with analysis of 1,400+ other top stocks, to make more informed investment decisions.

Executive Commentary

CEO Oliver Zipse emphasized BMW’s global positioning, stating, "We are a truly differentiated global player." He also highlighted the company’s commitment to its brand promise: "The BMW brand is a promise, and we deliver on our promises."

Risks and Challenges

• Tariffs continue to pose a risk, affecting automotive margins.
• The Chinese market presents challenges despite some monthly improvements.
• Regulatory scrutiny in China could impact future sales.
• Market saturation in the automotive industry may limit growth.
• Macroeconomic pressures could affect consumer spending and demand.

BMW’s Q2 2025 earnings call underscored the company’s strengths in electric vehicle sales, while also highlighting ongoing challenges in revenue and market conditions. The company’s strategic focus on innovation and cost management appears aimed at navigating these complexities.

Full transcript - Bayerische Motoren Werke (BMW) Q2 2025:

Conference Moderator, BMW Group: Thanks, ladies and gentlemen. Good morning, and welcome to the telephone conference of the BMW Group for the second quarter. Today, we have here, as always, Oliver Zipse, chairman of the board of management and our CFO, Walter Mehta. First, Walter will take you through our financial results. Oliver will then give you a general business update for the BMW Group.

After a short break, we will then have time for our q and a session. Walter, please go ahead.

Walter Mehta, CFO, BMW Group: Good morning, ladies and gentlemen. After the first six months of the year, the the BMW Group remains on track to meet its full year targets for 02/2025. As expected, tariffs weighed significantly on financials in the second quarter. Nevertheless, the BMW Group achieved group earnings before tax of over €5,700,000,000 and a group EBT margin of 8.5% in the first six months. In the second quarter, deliveries to customers at group level increased by 0.4% year on year.

As of June, BMW Group global sales remained on par with last year. All electric vehicles made an important contribution with a share of total sales of 18.3. The share of electrified vehicles, meaning full electric vehicles or plug in hybrid vehicles, amounted to 26.4%. Group earnings before tax totaled over EUR 2,600,000,000.0 in the second quarter and over EUR 5,700,000,000.0 after six months. This resulted in a group EBT margin of 7.7% in Q2 and 8.5% in the first half year.

The operating profit in the Automotive segment reached EUR 1,600,000,000.0 in Q2 and over EUR 3,600,000,000.0 after six months. This led to an automotive EBIT margin of 5.4% for the second quarter and 6.2% for the year to the June, both within our full year guidance of 5% to 7%. Excluding the depreciation resulting from the purchase price allocation of BVA, the margin came in at 6.5% for the second quarter and 7.3% through six months. Let’s take a look at how the automotive segment performed across key metrics. Between April and June, deliveries of BMW, MINI, and Rolls Royce vehicles to customers were on previous year’s level with over 621,000 units.

We saw sales growth in all regions except China. The BMW brand declined slightly by 2.6% compared to the 2024. Outside of China, the brand grew by 4.7. MINI benefited from the full availability of the entire model range and reported a significant year on year growth of 33.2% in the second quarter across all regions. Retail sales in Q2 were especially strong in Europe with double digit growth of 10.2 year on year.

The European order intake for BMW remained strong with an order bank reaching well into the fourth quarter. The U. S. Reported a growth of 1.4% in Q2. In China, retail sales levels in the 2025 were down 15.5% compared to the previous year.

However, during the second quarter, we saw a slight sequential improvement month by month. Sales of our all electric vehicles continued to grow. In the second quarter, we delivered more than 111,000 all electric vehicles to customers. Automotive segment revenues decreased moderately by 8.4% to EUR 29,400,000,000.0 in the second quarter. Adjusted for currency translation effects, the decrease was 5.3%, mainly due to lower sales volume in China.

Segment EBIT for the period from April to June totaled EUR 1,600,000,000.0. The EBIT margin came in at 5.4% for the quarter and 6.2% for the half year. These margins include the negative effects from extra tariffs, which amounted to around two percentage points in the second quarter and around 1.5 percentage points in the first six months. And we mustn’t forget the effect from the BBA purchase price allocation I just mentioned. That brings me to my next slide to take a detailed look at the year on year changes in the operational result.

Automotive EBIT declined by around EUR 1,100,000,000.0 compared to the 2024. More than half of this difference is due to the impact of tariffs, which is included in the position other. Changes in currency and raw material positions were neutral in Q2. But in the second half year, we expect a headwind year on year, especially because of renminbi. The net balance of volume, model mix and pricing effects negatively impacted EBIT by EUR 300,000,000 in the second quarter compared to the previous year.

Volume and model mix combined were neutral. Pricing continues to be a headwind year on year, however, to a much lesser extent than in the first quarter. Competitive pressure remains strong, especially in the Chinese market. Here, price levels of the 2024 continued into the 2025 as expected. Research and development expenses decreased by about €200,000,000,000 compared to the prior year quarter.

Group R and D expenditure as of June totaled €4,000,000,000 slightly below previous year. The R and D ratio according to the German commercial code came in at 6% after six months. For the full year, R and D expenditure will be below last year’s level, and it will steadily decrease over the next years. Selling and administrative expenses also decreased by around €100,000,000 compared to the previous year. The year on year headwind of 1,100,000,000 from other cost changes can mainly be attributed to two factors.

First, the higher tariffs in The US and anti subsidy tariffs imposed by the EU Commission on electrified vehicles from China. And second, the sales of end of lease vehicles. Here, resell income was lower than in the 2024, yet remains positive on a portfolio basis. Free cash flow in the Automotive segment totaled about EUR 1,900,000,000.0 in the second quarter. Segment earning before tax amounted to EUR 1,600,000,000.0, which is EUR 1,000,000,000 lower than in the previous year’s quarter.

The net change in working capital reduced free cash flow by around EUR 300,000,000. A net effect from capital expenditure and depreciation had an impact of €200,000,000 in the second quarter. Capital expenditure for the first half year amounted to around €2,700,000,000 a significant year on year reduction of around €700,000,000 The CapEx ratio was 4.5% for the second quarter and 4% for the first six months. After the peak in 2024, CapEx will decrease for the full year 2025, and we expect the CapEx ratio below 6% for 2025. Changes to provisions negatively impacted free cash flow in the second quarter by around EUR 200,000,000.

This was mainly due to the consumption of warranty provisions. A change in the position other of around EUR 1,000,000,000 reflects the development of a set of various topics, including accrued expenses, interest and advance payments received, income taxes and liabilities for tariff expenses not yet paid. After the first six months, automotive segment free cash flow is on previous year’s level. It’s just over €2,300,000,000 For the full year, we are targeting a free cash flow of over €5,000,000,000 Our strong free cash flow generation enables us to further execute our consistent shareholder return strategy. In May, the Annual General Meeting authorized the Board of Management to buy back up to 10% of BMW HE’s share capital over the next five years.

Based on this authorization, a third share repurchase program with a volume of up to €2,000,000,000 was approved. It should be completed by 04/30/2027 at the latest. The first tranche of €750,000,000 began in May, and it will be completed no later than December 8. Let’s move on to the Financial Services segment. The number of new contracts concluded with retail customers in the first half year reached almost 825,000 contracts, a slight decrease of 3% year on year.

This is due to the challenging situation on the Chinese market, which led to a moderate decrease in new credit financing business. The new leasing business continued its dynamic growth in the first six months of the year. The penetration rate for lease and loan offerings increased by 2.5 percentage points to 43.7%. Driven by a higher average financing amount per contract, new business volume was on previous year’s level despite the slight decrease in new contracts. Segment earnings amounted to just under EUR 1,200,000,000.0, a year on year decrease of 19.5%.

This results mainly from two topics. In addition to provisions following the receipt of a revised operational tax assessment for prior years and the resell income of end of lease vehicles, which was lower than in the 2024, yet remains positive on a portfolio basis. The credit loss ratio across the entire loan portfolio remained at a low rate of 0.27%. In the Motorcycle segment, deliveries decreased moderately by 8% year on year. Segment revenues decreased by 2.8%.

Adjusted for currency translation effects, they were on par with the 2024. Segment EBIT in the second quarter totaled EUR 136,000,000 with an EBIT margin of 14.2%. Ladies and gentlemen, our outlook for the full year is based on assumptions, which are described in detail in our half year report. But let me briefly mention some key factors for our business development in 2025. In China, we have been observing increased monitoring of the automotive market by local regulatory authorities since the last two weeks of June.

This also affects commissions, payments from local banks to dealerships in connection with brokering retail financial and insurance products. Payment terms to the supplier base as well as increased scrutiny of price competition. Dealer commissions were significantly reduced by local banks in June, and we are closely following these developments and the potential impact on the Chinese automotive market. Ladies and gentlemen, as you recall, our guidance given in March included all tariffs in force as of March 12. In our quarterly statement for Q1, we had assessed and included all tariff increases announced as of May 7 and confirmed our original guidance based on certain assumptions.

And in today’s half year report, we maintain our consistent approach and have also incorporated the effects of all latest announcements. According to the announcement on July 27, an agreement between The US and the EU regarding the tariff situation is emerging. Based on published information by the respective authorities, we expect partial reductions of the currently applicable tariffs between The US and the EU from August 1. Additionally, tariff negotiations across the globe are ongoing and may result in further changes. Therefore, the expected impact from tariffs on our full year results can still only be estimated based on our certain assumptions.

For the full year 2025, we currently expect a burden from tariffs of around 1.25 percentage points on the EBIT margin in the automotive segment, including mitigations. Based on our assumptions, the full year outlook remains unchanged. That means on a group level, we are targeting earnings before tax at previous year’s level. In the automotive segment, we expect a slight increase in deliveries and an EBIT margin in our corridor between 57%. The EBIT margin in the Motorcycle segment should come in at between 5.57.5%.

In the Financial Services segment, we expect a return on equity in the range of 13% to 16%. Ladies and gentlemen, the BMW Group is a truly differentiated global player. This strong strategic positioning enables us to mitigate the impact of tariffs and allows us to adapt swiftly to changing market conditions. The BMW Group has a focused strategy and a clear plan how to effectively navigate our operating business. As a result, we were able to provide a comprehensive guidance for the year 2025 in March, including the impact of tariffs.

And we delivered an EBIT margin within the full year target corridor of 5% to 7%, both in the second quarter and for half year. At the BMW Group, we are steering our business carefully and in a consistent manner. During the last years, we significantly invested in the future of our company in line with our long term planning. In 02/2024, both CapEx and R and D reached peak levels. Starting in 02/2025, we are reducing CapEx and R and D spending as planned.

Our operating costs are also decreasing compared to prior year. Just as in Q1, this is again evident in our Q2 figures. Based on the results of the first six months, we once again confirm our full year targets for 2025. And we remain committed to our long term goals of premium profitability and capital return to create value for all of our stakeholders. Thank you.

Conference Moderator, BMW Group: Thank you very much, Walter. Now over to our CEO, Oliver Zivse. Please.

Oliver Zipse, CEO, BMW Group: Ladies and gentlemen, good morning. Thanks to the strength and foresight of our strategy, our attractive product portfolio and our global team and operations, the BMW Group is built to weather various conditions. And it underscores that there’s not one automotive industry. There are players with different strategic approaches. Through the first half year, our sales performance demonstrates the appeal of our global brands and the ongoing success of our broad technological approach.

After confirming our original guidance from our annual conference after the first quarter results, we remain on track with our financial targets for the year despite ongoing tariff uncertainty and fluctuations in the Chinese market. Unpredictability is a long standing feature of the auto industry and is the norm in today’s business environment. What is decisive is how you deal with it. Because global success is rather predict predicated on your ability to anticipate developments and to respond rationally and efficiently. That is fundamental to the BMW Group.

The overall global automotive market is growing. We are always ready to profitably gain market share wherever individual market conditions allow. As dynamics in the industry shift, we know exactly where we are placed with our premium brands and where we can pursue opportunities, maintaining a healthy balance of value creation and market share. Over many decades, we have built up comprehensive and balanced network of sales, production, and supply chain operations spanning the major regions. This makes us one of the few truly global players in the industry, and our deep roots in global markets offer us many advantages.

First, they allow us to tap into leading edge developments in the individual markets and understand specific customer needs, Our ties to research universities, our R and D network and IT hubs, and our network of local tech partners enable us to leverage key competencies from individual markets for our global products and strategy. Second, through our extensive footprint in key markets, we remain resilient in the face of geopolitical instability and ever increasing regulation. And finally, our strong ties also allow us to engage in direct discussion with key political decision makers who value our perspective. Here, it is not just about our individual interests, but rather finding solutions for customers worldwide and driving shared economic prosperity. The BMW Group welcomes fundamental agreement between the European Union and The United States to reduce tariff from both sides of The Atlantic, and it’s now important to quickly finalize and implement the agreed measures.

We will continue to advocate for trade between the EU and The US not to be hindered by import tariffs. The currently agreed US tariffs also burden European exports, affecting consumers and globally operating companies. Therefore, we urge both sides to continue working towards market openness and the convergence of techno of technological regulations. Through our global production network and supply chains, we maintain high flexibility to respond to fluctuations. Our production plants are attuned to market demand, allowing us to achieve capacity utilization above the industry standards.

At our largest single plant in Spartanburg in The United States, for example, we produce over 420,000 vehicles annually, over half of which serve the local market and half of which we export. Across The United States, we have created extensive value chains as well as a competency hub for of our for our global x family of vehicles in Spartanburg, which remain in high demand across the entire globe. BMW made in America and sold to the world. This combination of leveraging the competitive advantage of The US market in SUVs with brands BMW’s brand strengths allows us to develop product which speak to customer needs in markets worldwide. For the current financial year, our sales results continued into Q2 in line with our expectations as conditions continue to vary from market to market.

In Q2, we saw a sequential improvement from Q1. Outside of China, all three of our major sales regions posted growth. Group sales in these markets combined to grow by 6.3% through the first six months of the year. Group sales in Europe grew overall by 10.2 in the second quarter and in Germany alone by over 10%, with growth in most markets outpacing the passenger vehicle market. Overall, the BMW brand increased its market share in Europe.

Among the most successful BMW models were those in the business class segment. In the first half of the year, the BMW five Series saw growth of more than 40% worldwide compared to 2024. Other notable models saw success, including the BMW x two models, which more than doubled sales through June. With the full availability of the new MINI family, the brand grew in all regions worldwide, including in China. In the first half of the year, more than one in three MINIs sold was a fully electric vehicle.

Rolls Royce increased deliveries by nearly 10% in the second quarter, driving by strong sales from the Talenden Series two. Drivetrains and model variants across the portfolio continued to see success in q two. BMW M sold nearly 106,000 vehicles through June, the best ever first half year of the brand. Sales of plug in hybrid models from the BMW brand grew by almost 30% in the first six months. Our BEV models continue to be a fundamental pillar of our strategy.

In the second quarter, we achieved an important milestone with the delivery of our 1,500,000 all electric vehicle. And across the portfolio now, we offer more than 15 all electric models. In Europe, the group’s best share reached 25%. With the PHEV’s included, the electrified share reached nearly 40%. And across all brands, BMW is the third best selling BEF brand in Europe.

While we are proud of our position as a leading BEV player, we we know that the world is multidimensional. To meet consumer needs, especially in a product as complex and personal as a car, there is no single answer. Our q two results show that we can serve multiple preferences simultaneously. BEVs, p hats, and our m models all achieved growth. The most effective strategic approach is to use all technology to reduce c o two emissions overall.

We remain committed to the goals of the Paris Climate Agreement while advocating for a review of the 2030 and 2035 targets in the European Union. To achieve these goals and create effective c o two regulations, we must take a comprehensive view across the entire value chain. This would consider all emissions across the entire life cycle and not just health hub emissions, from the supply chain to the raw materials used in the car, the production process, the vehicle drive, energy used to power the vehicle, and finally, all the way up to recycling. And dependency on a single technology can be damaging to an industry. Putting all your eggs in one basket is just poor asset allocation.

Hydrogen, for example, offers Europe an opportunity to use our expertise and take the lead on an emerging technology that will contribute to our climate goals. And unlike best, without the need for large amounts of raw materials for or or battery technology, which are not localizable at large scale in Europe. Beyond drivetrains, there is great potential with alternative fuels. There are more than 250,000,000 vehicles in The EU, which could now immediately contribute to climate protection. But this requires a clear regulatory pathway and targeted investments in the ramp up of all renewable fuels.

The Hafra o 100 as an example. While it is already available in markets across Europe, tech schemes and the c o two fleet targets need to recognize this renewable fueling option to incentivize customer adoption. This would also help in scaling an alternative fuel that has a 90% CO2 saving compared to normal fuels and can already be accessed today. For OEMs and customers, this is also a cost effective way to reduce emissions in the use phase. For Europe to maintain competitiveness and finance its future, we need to invest not only in new technologies, but also leverage our existing technologies, which can meet customer preferences and still contribute to climate targets.

For the BMW Group, we’re now just five weeks away from the next major innovation step, which our entire company has been fully focused on for many years now, the launch of the Neue Klase. On September 5, we will celebrate the world premiere of the all new BMW I x three, the IAA mobility here in Munich. In June, we hosted media representatives at the pre drive event in Miramar in Southern France. The initial feedback has been tremendous, and we remain right on time with the launch, including at our new plant in Departure. Construction also continues at our battery assembly facility in Bilbock, Karski.

With the Neue Glaston, we are making great strides in all relevant technology fields, whether in electrification, digital user experience, driving dynamics, or sustainability. A new BMW I x three will be a benchmark in our industry. The all electric sixth generation powertrain will set standards in performance and efficiency, powered by our battery cells developed in house with 20% more energy density, an electric range of up to 800 kilometers according to WLTP. With 400 kilowatt maximum charging, customers will be able to add over 350 kilometers to their vehicles range in just ten minutes according to WLTP and with an energy consumption of 50 kilowatt hours per 100 kilometers. In addition, our revolutionary new iDrive will change the way the driver interacts with the car.

With the BMW iDrive, we set an industry standard more than twenty years ago. After the reveal of the all new panoramic iDrop at CES in January, we are already seeing the industry follow our lead. With the technology clusters we have developed for the Noeck Classem, we will scale our advanced technologies across the portfolio. We will start in the core segment to build momentum quickly. This is simply smart economics.

By 2027, we will bring 40 new models and model updates with the Neue Classe technology and design language on the road worldwide. Our technology cluster approach allows us to integrate market specific features and content. In our major sales regions, we have a variety of local solutions with leading partners. This allows us, for example, to further enhance the digital user experience as well as automated driving functions in our upcoming Neue Klasse models. In China, for example, we are collaborating with Alibaba Bama to develop the next level of intuitive and conversational in car voice interaction.

We will also enhance our BMW Intelligent Personal Assistant with functionality from DeepSeek in our vehicles in China. In most other countries, the next gen BMW Intelligent Personal Assistant will be powered by large language model technology from Amazon Alexa. For driving assistance systems that meet local needs and regulations, we’ve also sought out partners in different geographies, always following our philosophy in this area, smart, symbiotic, and safe. Just two weeks ago, we announced a new partnership with Momenta, a leading Chinese ADAS technology provider. The partnership will focus on software development and integration for Chinese road networks, traffic conditions, and user expectations, utilizing advanced AI AI algorithms and data driven development methods.

We will launch the systems in China starting with our Neue class. In other markets, we continue to build on our already very successful partnership with Qualcomm. These examples show how adaptive the Neue class architecture is. With the software defined vehicle, we maintain competency over all systems of the car and can roll them out to markets at the same time across the world. But we also are able to quickly integrate local tech stacks into our own ecosystems to give consumers access to innovations and features they are used to.

And through backward integration of software solutions available for all aspects of the vehicle over the air, we will continuously enhance the customer experience. This overall is a huge advantage for us. Ladies and gentlemen, our consistent strategic approach and continued success is not a coincidence, but the results of resolute long term planning and orientation. It is a multiyear process in every area of the company. That is what our stakeholders expect from us.

The BMW brand is a promise, and we deliver on our promises. We continue to build upon the strong position we are in today. And with the rollout of Neue Cluster Technologies and products over the next two years, we will bring the company to a whole new level. Thank you.

Conference Moderator, BMW Group: Thank you very much, Oliver. Ladies and gentlemen, we now have a short break before we move on to the q and a sessions. See you in five minutes.

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