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The company’s automotive margin was 2.3% in its latest results, while it expects a margin of only 1% to 3% in 2026 after a fresh deterioration in China and the impact of tariffs and other external pressures.

The restructuring comes after BMW cut its 2026 outlook in June for the third time in just over three years. The company blamed an accelerating downturn in China, particularly for vehicles with combustion engines, as well as higher costs and weaker consumer sentiment linked to the conflict in the Middle East. US tariffs have added another burden.

BMW’s shares have fallen by more than a third over the past year and recently touched their lowest level in more than six years. The stock’s performance has added urgency to the new strategy.

A central part of the programme is a leaner management structure. BMW plans to eliminate 20% of its divisions and associated management roles by mid-2027. The cuts include more than 100 management positions, including roughly one-fifth of its senior vice-presidents.

The wider redundancy programme is expected to reduce the German workforce by about 8,000 positions, mainly in administration and development rather than in factory production.

BMW has agreed to the workforce measures with its works council, with voluntary buyouts due to begin in October.

The company has emphasized that it is not targeting its German manufacturing operations. It also plans to continue investment in domestic production, including a new battery facility in Bavaria and the next generation of key models.

Artificial intelligence is the second major pillar. BMW intends to use AI across its value chain to simplify processes, accelerate development, and improve decision-making. The company also plans to expand autonomous-driving capabilities, initially in Germany.

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BMW is reshaping its product strategy to align with the varying conditions in its main markets. In Europe, the company plans an entry-level premium electric vehicle from 2028, expanding the reach of its Neue Klasse technology. In the United States, BMW will introduce a new luxury sport-utility vehicle positioned above the X7, aimed at affluent customers and supported by regionalised production.

China is receiving a different response. Rather than relying as heavily on products and technology developed elsewhere, BMW plans to increase local production and partnerships.

It wants 95% of the vehicles sold in China to be tailored to local preferences by 2030 and is examining the possibility of exporting vehicles produced in China to Southeast Asia. Local technology partnerships will include areas such as autonomous driving and integrated software.

The company is also under pressure to preserve its premium positioning while competing on cost and technology.

That makes the restructuring a balancing exercise: BMW must cut bureaucracy and duplication without slowing innovation or damaging the engineering capabilities that underpin its pricing power in luxury markets and protect its brand strength in key markets.

The company is also seeking to simplify its product portfolio. BMW plans to reduce model variants and focus resources on products and configurations that generate stronger returns. BMW expects to launch around 40 new or updated models in the coming years.

The Neue Klasse platform remains central to that offensive. BMW has already begun rolling out the fully electric iX3 and has introduced the new i3, while the eighth-generation 3 Series is bringing Neue Klasse technology into one of its most important nameplates.

BMW plans to offer the new 3 Series with both electric and combustion-engine powertrains, demonstrating its technology-neutral approach.

That flexibility is important because the transition to electric vehicles is progressing at different speeds across regions. BMW intends to maintain a mix of battery-electric, plug-in hybrid, and combustion-engine vehicles, rather than committing to a single drivetrain strategy.

The company has previously said it expects fully electric vehicles to account for at least half of global deliveries by 2030, subject to market conditions and charging infrastructure.

The restructuring also includes changes to BMW’s supply chain. The company plans to deepen partnerships with suppliers, secure critical raw materials and semiconductors through additional agreements, and shorten development lead times. In China, it intends to adjust its dealer network to market conditions.

For investors, the immediate issue is that the recovery will take time. BMW is signalling that margins will remain under pressure through the latter part of the decade before its longer-term targets become achievable.

That means the strategy is less a quick earnings fix than an attempt to reset the company’s cost base, product mix, and regional operating model.

Chief executive Milan Nedeljkovic, who took over in May, has framed the changes as necessary to compete in an industry undergoing a structural shift.

The challenge is to execute the cuts without weakening BMW’s ability to develop products while simultaneously investing in electric vehicles, software, and AI.

BMW’s plan therefore rests on three linked bets: a smaller and more efficient organisation, greater use of AI and regional technology, and a product range tailored to local demand.

Whether those measures can lift margins from the current low level towards 3% to 5% by 2028 will be closely watched by investors as the company moves into the next phase of its transformation.