BMW targets margin recovery with cuts and local production

By Christina Amann and Rachel ‌More

MUNICH, Sept 30 (Reuters) - ​German premium ​carmaker BMW will set out plans for more local production as it seeks to rebuild margins after a series of profit warnings tied to weak performance ‌in China, Bernstein analysts said on Wednesday.

BMW is due to unveil its ⁠strategy update later on Wednesday at a capital markets day for investors, but Bernstein outlined key elements of ‌the plan in a note after ‌meeting management.

The company's reputation for resilience was dealt a blow in June when it issued a shock profit warning, its third in just over three years linked to weakness ​in China. The setback underscored the challenges facing Europe's carmakers as they contend with falling sales in China and US tariffs.

The Munich-based carmaker responded with a redundancy programme expected ⁠to affect about 8,000 jobs in Germany, joining Volkswagen and Mercedes-Benz in slashing costs.

BMW, whose shares have fallen more than a ​third over the past year to their lowest level in more than six years, is presenting its recovery plan at a two-day event ​in Munich and at its Gut Schwaerzenbach retreat in ‌Bavaria.

Bernstein said BMW would set a mid-term margin target of 3% to 5% for its automotive division by 2028.

By the early 2030s, BMW would ⁠aim to restore margins to 8% to 10%, a sharp improvement from its most recent result of 2.3%.

Share in the company were trading 1.4% higher at 0744 GMT.

"BMW understands the solution is not simply ⁠cost-cutting. It is also pursuing growth with innovative products," Bernstein analyst Stephen Reitman said, adding that the Neue ​Klasse range, led by the electric iX3 SUV, is central to the recovery plan.

BMW will confirm plans to launch a luxury SUV positioned above the X7 and expand its M and Alpina ranges from 2027 ‌to strengthen its premium offering, Bernstein said.

A BMW spokesperson said details of its strategy would be announced later on Wednesday.

Separately, BMW said it ‌would invest about €2 billion ($2.3 billion) in German production of its next-generation 3 Series sports sedan.

According to Bernstein, ⁠BMW's European and US plants are ‌fully utilised, with China "the main ​area requiring production adjustment and capacity flexibility".

($1 = 0.8811 euros)

(Reporting by Christina Amann and Rachel More. Additional reporting by Thomas Seythal, Editing by Ludwig Burger and ‌Mark Potter)

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