German automakers in general and BMW in particular are stumbling as Chinese manufacturers outcompete them in the premium market they once dominated, according to a report from Professor Ferdinand Dudenhoeffer’s Center for Automotive Research .

The German automotive business model no longer works, according to the report.

Radical changes are required by BMW, and a major shareholder meeting planned for late September, will show whether management has a credible path back to growth—or whether deeper structural problems lie ahead.

“The “China Problem” is not unique to BMW; it is a challenge facing all German automakers. The old business model – developing a car in Germany then building a long-wheelbase version in China a year later – no longer works. VW appears closest to a solution, whereas, in our assessment, BMW is still a long way off,” Dudenhoeffer said in the report.

This will come as no surprise to BMW shareholders. The share price has slid almost 40% this year as it became clear that what had been almost a license to print money in China was reversing, while the Sino threat gathered pace in Europe.

BMW investors had hoped that only lesser mass-market breeds like Renaults, Fiats, Peugeots and VW’s own brand would succumb to Chinese value-for-money temptations. The thoroughbreds of Porsche, Audi, Mercedes and BMW surely would not be threatened by names like Hongqi, Yangwang, NIO and Zeekr. But a BMW iX3 or Porsche Panamera lookalike at 30 to 50% off will turn the heads of the most patriotic Europeans.

Long- term profit target still 8 to 10%

And all this pressure has taken its toll on BMW’s finances. In the second quarter pre-tax profit fell 35% to €1.7 billion ($2 billion), while the operating margin for the core automotive business narrowed to 2.3% from 5.4% in the same period last year. BMW restated its 2026 forecast of an operating margin of between 1 and 3%. In June, BMW warned about a threat to its profit targets. Some investors may remember that the long- term profit target was 8 to 10%, but it will take until the next decade to return to that, BMW said.

BMW also announced a plan to cut about 8,000 jobs, around 5% of the workforce. Volkswagen wants to cut 100,000 jobs and shut 4 factories.

In a report entitled “BMW and the German Auto Industry – The China Problem”, Dudenhoeffer said losing sales in China is not an immutable law of nature.

“Tesla, for instance, managed to increase its sales in China by over 100,000 units in the first half of the year with its ageing Model 3 and Model Y, without a vast model lineup or a religious devotion to “technology neutrality”, but with a compelling price-to-value ratio,” Dudenhoeffer said.

“Too expensive, too slow, lacking modern tech”

“In the first half of 2026, BMW lost exactly 56,352 vehicle sales in China compared to the same period of 2025. These losses are not a one-off event but part of an ongoing pattern; the pattern began in 2023. The root cause is not Donald Trump, tariffs, or other macroeconomic factors, but rather – in our assessment – the German auto industry’s business models, which apparently no longer works,” he said.

“Too expensive, too slow, lacking modern tech,” Dudenhoeffer said.

Pedro Pacheco, auto analyst with consultants Gartner, said this applies to the Germans generally.

“They (the Germans) are losing big in China and they may not be able to recover there anymore," he told Politico .

Analysts don’t seem too bothered by BMW’s prospects. Investment researcher Bernstein rates BMW shares “Outperform” and a report entitled “BMW: The rebuilding process” talks about the negative developments in China. These could not be offset by positive volume developments in Europe and the U.S. Middle East turmoil was lasting longer than expected. This was undermining global consumer sentiment.

Bernstein acknowledged the eventual beneficial impact of cost-cutting, and BMW’s review of its suppliers.

"We expect to hear more about the building blocks towards that long term margin target (8 to 10%) at BMW’s upcoming CMD in September,” Bernstein said.

BMW is holding a so-called Capital Markets Day to inform investors of its long-term plans on September 29 and 30.

Investment researcher Jefferies rates BMW shares as a “hold”.

“At stake for BMW (at the CMD) are how to restore attractive profitability of course, as well as a reputation earned through years of thoughtful strategic decisions and a track record of few mistakes. Investors will seek new capital allocation (more cash returns) while the debate may be more about capital efficiency,” Jefferies said in a report.

  • New relationships with suppliers
  • Shrinking is not an option – BMW has consistently stressed growth as essential to productivity. Will this come from Autos or other sources?
  • Roadmap to 8-10% - Can Neue Klasse reduce costs.
  • Resizing or re-purposing China.
  • Strengthening U.S. – localizing engines in the U.S. makes sense because their future in Europe looks uncertain.

BMW’s Neue Klasse is a multi-billion-euro technological overhaul designed to reshape the entire vehicle portfolio. Focused on electrification and digitalization, the program underpins over 40 upcoming models, starting with the electric iX3 SUV and i3 sedan.

But CAR’s Dudenhoeffer expects BMW’s decline to continue in the coming quarters.

Business model not viable

“The business model – characterized by high development costs and a vast product range in Germany, followed by production in a Chinese BMW plant – is no longer viable. China has become the new benchmark in the automotive world; success requires adhering to the rules of the Chinese market.”

“The new standards include “China speed”, streamlined model lineups, digital-first cockpits and interiors, advanced driving functions such as Navigation on Autopilot, that are continuously improved via AI, and constant battery innovation within China. Giga-casting is being employed not only by Tesla but also, naturally, by Xiaomi and others,” Dudenhoeffer said.

And then there are China prices. Dudenhoeffer said the starting price of an Xiaomi equivalent of the BMW iX3 is less than €30,000 ($34,600). The Neue Klasse iX3 starts at €63,400 ($73,100) in Europe. VW’s “In China, for China” strategy makes sense with partnerships with Xpeng and semiconductor firm Horizon Robotics , he said.

“BMW’s decision to cut 8,000 jobs offers a brief respite, but nothing more. That approach worked in the past, but not today, because China is the new home of the car of the future. BMW needs to reinvent itself – right there in China,” Dudenhoeffer said.

BMW has been asked to comment.