BMW Group reported first-quarter earnings before tax of €2.35 billion, down approximately 25 percent from the year-ago period, as the automaker absorbed €700 million in combined volume and pricing headwinds across its core markets.
The Automotive segment posted operating profit of €1.345 billion on revenues of €27.2 billion, producing a 5 percent EBIT margin that CFO Walter Mertl described as the middle of the company’s full-year guidance corridor of 4 to 6 percent. That figure is reported without adjustments and includes a 1.25 percentage point drag from tariffs and another 1.2 percentage points from purchase-price-allocation depreciation tied to the Brilliance-BMW Automotive joint venture. Strip those items out and the underlying operating performance would be tighter still.
The €700 million decline in net volume, model mix, and pricing reflects what Mertl called “intense competitive pressure across all major markets.” BMW Group deliveries fell 3.5 percent to 565,780 units in the quarter, with the BMW brand down 4.6 percent to 496,006 vehicles. China was the sharpest market: BMW sales there dropped 10 percent, though the brand outperformed a Chinese market that contracted 17.5 percent in the quarter after the government reduced subsidies and changed regulations. In the U.S., BMW deliveries declined 4.0 percent, better than the overall market’s 6.6 percent drop, as the brand offset collapsing EV demand with internal-combustion sales. Electric-vehicle deliveries fell sharply after the discontinuation of IRA support in the fourth quarter of 2025.
Currency and raw materials added another €400 million of year-over-year pressure, continuing adverse foreign-exchange developments that began in the second half of 2025. The combined effect of those two line items, plus the tariff burden, accounts for most of the €700 million operating-profit decline from the first quarter of 2025.
BMW is responding with cost discipline that shows up in the research-and-development line. Group R&D expenditure totaled approximately €1.8 billion in the quarter, down 12 percent year over year, thanks to what Mertl described as early investments in the NEUE KLASSE platform that are now paying off in reduced spending. The R&D ratio under German Commercial Code accounting came in at 5.7 percent. Selling and administrative expenses fell €100 million.
Free cash flow in the Automotive segment was approximately €800 million. Working capital consumed €500 million as first-quarter inventory built up ahead of expected production volume, a typical seasonal pattern. Capital expenditure ran at a 2.0 percent ratio, also typical for the first quarter, and depreciation exceeded capex by €600 million. BMW is targeting full-year free cash flow above €4.5 billion in the Automotive segment and continues to execute the second tranche of its third share-buyback program, a €625 million block scheduled for completion by the end of August.
The margin compression is the story. A 5 percent EBIT margin that includes more than two percentage points of accounting and tariff drag means the core business is running thin, and the pricing environment Mertl referenced is not getting easier. Whether cost cuts can offset competitive pressure through the rest of the year is the question BMW will need to answer quarter by quarter.
Source: BMW. Images courtesy of BMW.
