BMW's New CEO Draws the Line: A Pivot to Cost Discipline Amid China Headwinds
Milan Nedeljkovic marks a shift from 'no programs' to a structured restructuring, while confirming the 8-10% margin target and defending China profitability.
BMW.DE · Earnings Call · 2026-07-30
The Changing of the Guard
The BMW Group entered the second half of 2026 with a new CEO at the helm. Milan Nedeljkovic, who took over from Oliver Zipse, is making his mark with a structured restructuring program designed to restore the company's cost competitiveness. On the Q2 call, he was explicit: “Concerning the restructuring, I mean, first of all, I would like to emphasize that the basic strategic direction of the BMW Group is not fundamentally changing.” — Milan Nedeljkovic, CEO · 2026-07-30 But the details reveal a clear pivot toward efficiency. The plan is built on four pillars: customer and sales organization, organizational complexity, purchasing partnerships, and product development standards.This is a marked departure from the prior management's attitude. At the annual conference in March, Zipse said: “We are against programs. We are against publicly announced programs because that kind of reduces the responsibility of management to take that task very seriously.” — Oliver Zipse, Chairman of the Board of Management · 2026-03-12 Now, the company is embracing a formal program with 8,000 headcount cuts, acknowledging that the times demand more dramatic action. CFO Walter Mertl confirmed the strategic corridor remains intact: “we intensify and speed up our structure and efficiency measures to end up with our strategic corridor of 8% to 10%.” — Walter Mertl, CFO · 2026-07-30We have the open technology approach to our powertrains, which is one of our strengths and which brings us also into the future. We have a global footprint and a very strong product momentum with the Neue Klasse and all that is the backwind we have for the next years. On top of that, of course, and that's the issue we are talking is the cost structure of our company, which we need to improve.
China: Profitability over Volume
The biggest challenge remains China. Despite the market collapse in ICE vehicles and intense competition, Nedeljkovic insists the company's production footprint is balanced. “The production footprint is in our case quite balanced and well loaded, especially looking on to Europe. So our plant in Europe and the U.S. are well balanced, also in South Africa.” — Milan Nedeljkovic, CEO · 2026-07-30 He added that the volume in China is adequate and there is no need to reduce installed capacity. Walter Mertl emphasized that the joint venture remains profitable: “With respect to the joint venture profitability, we are still profitable in the joint venture. It's positive, not as positive as it was a year ago, but it's still positive, contributing to our group profit.” — Walter Mertl, CFO · 2026-07-30 The company is leveraging cost flexibility – a key differentiator – to manage Chinese ICE market headwinds. They have been working on cost reduction for over a year, yielding positive effects year-on-year. Prior to this pivot, Zipse had emphasized the company's resilience through technology openness: “First of all, technology openness. We're not depending so much on singular drivetrain developments in different markets.” — Oliver Zipse, CEO · 2025-03-14 That philosophy remains, but now it's paired with an aggressive cost program.Warranty and Residual Values
On the quality side, Mertl sees no reversal in the favorable warranty trend. “Even you see increased recall rates in the U.S., it's obviously a question one recall is not costing the same. So we are still recognizing that we have a good run rate, a positive fund compared year-on-year.” — Walter Mertl, CFO · 2026-07-30 Residual values, however, are under pressure, particularly in the U.K. due to ZEV mandates. The company is maintaining a cautious approach to residual value provisions, with €2.25 billion in extra provisions.Capital Intensity and European Footprint
One of the key questions on the call was whether the capital intensity of the Neue Klasse would force a deviation from the strategic corridor. Mertl was emphatic: “We are heading into the strategic corridors, and we will hit that. There is no intention to elevate this 5% again as we had to do during the course of the Neue Klasse implementation on CapEx as well as on R&D.” — Walter Mertl, CFO · 2026-07-30 The company also emphasized the competitive footprint across Europe, with a new plant in Debrecen playing a key role in localisation. Nedeljkovic noted that they have reduced cost per unit by 25% in Regensburg and Dingolfing over five years, showing the potential for efficiency gains.Growth as a Result, Not a Target
The new CEO also recalibrated the growth narrative.This echoes his predecessor's focus on contribution margin, but with a more explicit commitment to cost discipline. As BMW embarks on this restructuring, the market will be watching execution in the second half. The company has guided to a 1.25% EBIT impact from the program this year, but the long-term target of 8-10% remains the north star.Growth is important. It's a natural thing. The growing organism is something which is biologically a good thing. However, for us, growth is not a target in itself. It's a result of the business.