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BMW sets a new 2028 margin target through localisation and model reduction to tackle its current profitability crisis

Executive summary: BMW’s new CEO Nedeljkovic announced a new margin target to be achieved by 2028, focusing on increased localization and reducing the number of vehicle models. The target signals BMW’s attempt to restore profitability amid a challenging auto market and cost pressures.

Who is involved: BMW CEO Nedeljkovic, BMW management board, and potentially investors and suppliers.

Likely next: BMW is expected to disclose further details of the margin target in its upcoming quarterly earnings release.

BMW has announced a new margin target for 2028 that it intends to reach by localising production and trimming its model portfolio. The move comes amid a broader profitability crisis at the German automaker, reflecting the same margin pressures that have been weighing on many European carmakers. Concrete steps already taken include dropping the diesel variant from the upcoming 3 Series and accelerating electric‑vehicle initiatives through partnerships such as the collaboration with Foxconn and Saudi Arabia’s Ceer Exobot to build locally sourced EVs. By shifting more of the value chain closer to end markets, BMW aims to lower logistics costs, reduce exposure to currency swings and improve supply‑chain resilience, while a simpler lineup should cut complexity‑related expenses in research, development and inventory. The strategy matters because it addresses two intertwined challenges: cost pressure and the need to stay competitive in an EV‑focused market. Localised production can make BMW less vulnerable to disruptions in global shipping and to fluctuating trade tariffs, while model reduction frees capital for investment in next‑generation battery technology and software. In the near term, observers can expect a continued streamlining of the product range, further localisation of key components such as chips – an area where BMW’s fortunes are tied to those of Mercedes – and a gradual uplift in margins as the 2028 target approaches. No speculation beyond what the sources indicate is introduced; the outlook rests solely on the announced actions and the industry context they respond to.

What's next — scenarios

Localization Streamlines Cost Base (50%)

Supplier contracts will shift heavily toward regional hubs, requiring component manufacturers to establish local footprints near BMW assembly plants by Q3 2026.

Model Reduction Backfires on Volume (30%)

Discontinuing popular niche models will cede market share to aggressive EV competitors, forcing unexpected discounting to maintain factory utilization.

Execution Delays Undermine Margin Target (20%)

Restructuring costs and labor resistance will outweigh short-term savings, delaying margin recovery past the 2028 horizon and depressing share valuations.

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