The company’s decision to cut its profit margin forecast for the year was driven by a combination of factors, including the slowdown in demand for its vehicles in China, the ongoing global chip shortage, and the rising cost of raw materials. However, the company’s announcement highlighted the significant impact of electric vehicles (EVs) on the Chinese market. BMW’s decision to cut its profit margin forecast came as a surprise to many analysts, as the company had previously been optimistic about its sales prospects in China. This was particularly surprising given the fact that China is the world’s largest market for cars, with a massive consumer base and a strong demand for luxury vehicles.

This trend is driven by several factors, including government subsidies, technological advancements, and a growing consumer preference for environmentally friendly vehicles. The rise of NEVs has also led to a significant shift in the Chinese automotive landscape, with traditional car manufacturers like Volkswagen, General Motors, and Toyota facing challenges in maintaining their market share. These companies, once giants in the Chinese market, are now struggling to compete with the rapidly growing domestic NEV market. For example, Volkswagen, a long-time leader in the Chinese market, has seen its sales decline by 10% in the past year.

“The Chinese government has been very active in supporting its domestic auto industry, and they have been doing so for a long time.”

This statement by Packard, a prominent figure in the U.S. auto industry, highlights a key difference between the U.S. and China’s approaches to supporting their respective auto industries. While the U.S. has adopted a more limited and targeted approach to subsidies, China has taken a more expansive and sustained approach, leading to a significant disparity in the competitiveness of their auto industries. The Chinese government has implemented a range of measures to support its auto industry, including tax breaks, subsidies, and preferential access to financing.