Weekly Drive-By: European Automotive Credit

Research evidence excerpt

Weekly Drive-By: European Automotive Credit

J P M O R G A N Europe Credit Research

02 July 2026

Weekly Drive-By

European Automotive Credit

• What to make of the BWM profit warning? BMW (BMW) cut its full-year Europe Corporate Credit - Autos &

guidance quite visibly, reducing its Automotive Ebit guidance to 1-3%, from Auto Parts (HY) and Gaming

4-6%, and Automotive FCF for the year to €2.5bn (previously Auto FCF > Jemma Permalloo, CFA AC

€4.5bn) on the continued softness in China, which has further accelerated in (44 20) 7134-8153

2Q, and the Middle East conflict and energy prices, which altogether have jemma.permalloo@jpmorgan.com

contributed to a “ significant decline in profit and free cash flow” in the second J.P. Morgan Securities plc

quarter. Group profit pre tax was also revised down to a significant decrease

yoy vs the previous guidance of a slight decrease and all in all, it sounds like

yet another warning for the Automotive sector; until recently, BMW had

historically been fairly resilient to the pressure from China and had managed

to maintain its premium position vs peers. In 2025, BMW saw China deliveries

falling by 12.5% – now down 18% through May.The forecast revision not only

saw its stock trading lower on the day, but the read-across to other OEMs led

to investors buying protection in the likes of Volkswagen (VW). When

Mercedes-Benz (MBGGR) released its guidance earlier in March, the

company also indicated that it expects to see the China car market “slightly

below” last year’s level. Volvo Cars (VOVCAB) similarly, while reporting a

2Q global sales decline of -5.6% yoy, cited a continued challenging operating

environment across regions, “especially in China, where the overall industry

remains under significant pressure”.