BMW plans recovery with AI job cuts and a bet on new models

BMW will use AI to eliminate a fifth of its management roles by mid-2027, which is all part of a recovery plan the German carmaker unveiled on Wednesday to rebuild profits hit by China’s price war and the cost of its shift to electric vehicles.

The reductions target senior divisions and the leadership tied to them, and the effect of these cuts ripples down to lower ranks as the company leans on AI to run leaner. The Munich-based manufacturer has about 65 senior vice presidents reporting directly to the board, with another 400 or so senior managers making up the next layer.

BMW is being unusually direct about AI’s role in its job cuts, unlike many employers that avoid making the connection. Chief Financial Officer Walter Mertl stated that the company’s more extensive use of agentic AI will help streamline its structure, speed up decision-making, and ensure development is more agile and efficient.

The German automaker is not alone in its plans to replace management roles with software. United Parcel Service has cut 12,000 management jobs that it says AI will keep from returning, while Deutsche Lufthansa plans to eliminate 4,000 administrative positions by the end of the decade.

BMW’s 8,000-job buyout comes amid bruised balance sheet

In July, BMW struck a voluntary redundancy deal aimed at removing about 8,000 white-collar positions in Germany, about 5% of its global headcount, people familiar with the plan said at the time, according to Euronews.

BMW’s financial troubles became harder to ignore in June, when the company warned that its automotive margin could fall to as little as 1% this year. The pressure was already showing in its first-half results, where operating profit plunged 37% to €3.64 billion, while revenue fell 8%, according to an EY analysis cited by Yahoo Finance.

This was the sharpest decline among the 19 carmakers covered in the analysis. Sales in China fell 19%, more than wiping out the 6% growth in Europe and 4% gain in the US.

BMW’s shares have fallen about 40% this year, closing Tuesday at €54.50 in Frankfurt, according to The Business Times. The stock then climbed by over 3% on Wednesday as investors digested the recovery plan. Bernstein maintains an outperform rating on the shares and a target price of €82.

Margin targets and a simpler lineup

Milan Nedeljković, who took over as BMW’s chief executive in May after starting out as a trainee at the company, sees 2026 as a year of transition. BMW wants to lift its automotive operating margin back to 3% to 5% by 2028, before returning to its longer-term 8% to 10% target range at the start of the next decade. The company also expects free cash flow from the segment to reach at least €7 billion.

BMW’s plan for a turnaround and recovery in the markets starts with simplifying the business. The company says its model lineup has become too complicated, so it plans to cut variants, speed up development, and work more closely with suppliers.

Some models, including the 2 Series Active Tourer, will not get successors, according to BMW’s own announcement. In China, the company is also reducing its dealer network and sourcing more standardized parts locally, a shift Bernstein estimates could lower component costs by 20% to 30%.

Pricier cars amid a 2 billion euro German bet

BMW is also looking to higher-priced models to improve returns. The plan includes a new SUV positioned above the X7, more high-performance M models alongside a bigger role for Alpina, which would sit between BMW’s core luxury lineup and the Rolls-Royce, The Business Times reported.

Europe is also set to get a compact fully electric model based on Neue Klasse technology in 2028, while early orders for the electric iX3 have already gone above 100,000.

BMW is pairing the job cuts with about €2 billion in new investment in German production, including €1 billion for a battery plant, Yahoo Finance reported. From 2027, the century-old Munich plant will switch to producing only electric cars, starting with the i3, while production of combustion-engine and hybrid versions of the 3 Series will move to Dingolfing.

Production chief Raymond Wittmann said the investments are aimed at strengthening value creation, which would keep German plants competitive and protect more jobs.

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