FRANKFURT, Germany, June 16, 2026 (BSS/AFP) - German carmaker BMW downgraded its 2026 targets Tuesday due to turmoil from the Middle East war and worsening business in key market China, and vowed to step up cost-cutting efforts.

It is the latest bad news from Germany's ailing auto sector, and a major blow for a manufacturer which had so far endured industry upheaval better than its peers Volkswagen and Mercedes-Benz.

Munich-headquartered BMW said it now expects a "significant" decrease in pre-tax profit this year, against a previous expectation for only a moderate decrease.

It forecast a slight fall in vehicle deliveries, compared to a previous prediction for them to remain stable.

And profit margins in its auto division -- closely watched as a measure of the company's overall health ŠŠ will come in between one to three percent, down from an earlier expectation of four to six percent.

CEO Milan Nedeljkovic said BMW would "adapt our current structures and processes to the drastic downturn in market conditions".

"It is our entrepreneurial responsibility... to significantly intensify and accelerate our ongoing measures," he added in a statement.

He did not give further details, but the group said cost-cutting would hit its earnings in the second half of 2026.

Giving reasons for the downgrades, BMW said problems in China -- where it faces fierce competition from local rivals and a sluggish market -- "accelerated further in the second quarter, particularly for non-electric vehicles".

"Positive sales volume development in Europe and the US cannot offset the decline in sales in China and the Asia-Pacific region," it said.

In addition, the impact of the US-Israeli war against on Iran was worse than originally feared, it added.

High energy prices were weighing on the group and global instability was hitting consumer sentiment worldwide, the company said.

The United States and Iran announced a deal this week to end the conflict, and ships have again begun passing through the Strait of Hormuz, a key energy route.

BMW was able to weather the US tariff blitz better than its rivals in large part because its biggest plant worldwide is in the US state of South Carolina.

Profits at the carmaker, whose brands also include Mini and Rolls-Royce, held up relatively well in 2025 compared to VW and Mercedes.