BMW's strategy: Job cuts, AI and a €2bn bet on ‘Made in Germany’

German premium carmaker BMW Group is investing around €2 billion in vehicle production and battery manufacturing in Germany, as it unveils plans to rebuild profitability. BMW shares rose by more than 3% in the early afternoon in Europe on Wednesday as investors digested the German carmaker's latest recovery plans, shared with investors and analysts at its two-day Capital Market Day event on Tuesday and Wednesday. This comes as German carmakers try to rebuild profitability amid the costs of the shift to electric vehicles, global supply disruptions, high energy prices and fierce competition from Chinese rivals. BMW plans to improve profitability by simplifying its model range, shortening development times and working more closely with suppliers. BMW also outlined plans to cut the number of divisions and associated management roles by 20% by mid-2027 as part of the wider overhaul. The company also plans to reduce the number of model variants and make greater use of AI, including in crash simulations and driver assistance. The carmaker is aiming to lift its automotive operating margin to between 3% and 5% by 2028 and return to its long-term target of between 8% and 10% by the start of the next decade, suggesting a lengthy recovery. €2bn investment in German production Separately, BMW announced that it would invest around €2bn in production facilities in Germany, including €1bn for a battery plant. "We are investing in value creation, competitive production and job security in Germany," said BMW’s production chief Raymond Wittmann in a statement. With the investment, the Munich plant, which is more than 100 years old, is being transformed to produce only electric vehicles from 2027, including the BMW i3. At the same time, combustion-engine and plug-in hybrid versions of the BMW 3 Series will be built in Dingolfing. BMW emphasised that around 760 supplier locations supply the Munich and Dingolfing plants with components and materials. More than 70% of these production locations are in Europe, with more than 30% in Germany. The carmaker's new battery plant in Irlbach-Straßkirchen, Bavaria, will supply high-voltage batteries for the electric BMW i3 starting in October. According to BMW's statement, the battery plant is expected to "boost regional value creation, secure skilled jobs and add a future location to the industrial ecosystem of Lower Bavaria." Wittmann added that the new high-voltage battery plant in Irlbach-Straßkirchen showed how the company was bringing key electric vehicle technology back to Germany. He stressed that the country’s continued industrial success depended on conditions that support investment, innovation and competitiveness. BMW’s Steyr plant in Austria will produce key electric drive components as well as combustion engines for the new 3 Series range. The company produces more than one million vehicles in its German plants each year, equivalent to a quarter of the cars produced in the country. BMW is also following a “local for local” approach, producing cars close to the markets it serves. As part of plans to expand local production and development in China, its Shenyang plant will produce a modified version of the 3 Series tailored to Chinese buyers. In China, it is also reducing its dealer network and using more standardised, locally sourced components, which could lower the cost of those parts by 20% to 30%, according to Bernstein. BMW’s production plans come as its profitability faces pressure. BMW issued a profit warning in June. In July, it agreed to a voluntary redundancy programme expected to reduce its global workforce by around 8,000, according to dpa, citing company sources. According to an EY analysis, the group’s operating profit fell 37% to €3.64 billion in the first half of 2026, while revenue declined 8% — the sharpest fall among the 19 carmakers studied. BMW’s vehicle sales in China dropped 19%, outweighing growth of 6% in Europe and 4% in the US.