BMW profit warning drags European auto stocks lower

BMW shares fell sharply Wednesday after the company slashed its annual profit outlook late Tuesday, hitting their lowest since November 2020.usnews
Mercedes-Benz, Volkswagen, and Stellantis ↘2.01% also declined as the profit warning rippled across the European auto sector.wsj
Separately, Barclays ↘0.08% raised its STOXX 600 year-end target to 670 from 620 but kept autos at underweight, citing “lingering structural headwinds.”reuters

BMW Cuts Annual Forecast, Dragging European Auto Stocks Down

European shares traded broadly flat on Wednesday as losses in the automotive sector offset gains in technology stocks. BMW shares plunged after the German luxury carmaker slashed its annual profit outlook late Tuesday, citing a deepening slump in China and the financial toll of the U.S.-Iran conflict.

BMW Warns on Profits

BMW now expects an operating margin of 1% to 3% for its automotive division in 2026, down from its previous guidance of 4% to 6%, according to The Wall Street Journal. The company also said it anticipates a slight decline in vehicle sales this year, reversing an earlier projection of steady growth.wsj

In a statement released after markets closed on Tuesday, BMW said conditions in the Chinese automotive sector had deteriorated during the second quarter, with heightened competition spreading across the broader Asia-Pacific region. The automaker noted that decreased sales in Asia had offset gains in Europe and the United States. Reuters reported that the profit warning brought BMW’s stock to its lowest level since November 2020, also dragging down shares of Volkswagen and Mercedes-Benz.wsj

Auto Sector Slides, Tech Provides Support

The STOXX 600 Automobiles & Parts sector bore the brunt of the selloff. Mercedes-Benz shares dropped nearly 5%, while Volkswagen and Stellantis also declined around 3%, according to The Wall Street Journal.wsj

Technology stocks helped limit the damage to the broader STOXX 600. Chipmaker ASML and semiconductor equipment maker Aixtron were among the gainers, providing a counterweight to the auto-led weakness.

Barclays Turns Bullish on Europe

In a separate development, Barclays raised its year-end target for the STOXX 600 to 670 points from 620 and closed its underweight stance on European equities, Reuters reported. The bank cited reduced stagflation risk following the preliminary U.S.-Iran agreement and the subsequent decline in oil prices. Barclays also upgraded its full-year 2026 earnings growth forecast for the STOXX 600 to 12% from 10%, while keeping autos at underweight given what it called “lingering structural headwinds”.investing