Publication date: September 25, 2024

In the Sept. 20 article, we focused on the state of the German auto industry, highlighting Volkswagen. We are not going to cover all imaginative German car brands, but today in this article we would like to give you an overview of the situation and capabilities of the proud BMW. 

First a brief further introduction of this well-known car brand from Munich. BMW was founded in 1913 and now has more than 150,000 employees. It is Germany's third largest car brand in terms of sales after Volkswagen and Opel. Fun fact is that BMW also owns the famous Rolls-Royce and the hip Mini. BMW sells about 2.5 million cars a year, mainly in China and the US.  

In the period from April to the end of September this year, BMW's share price fell more than 33%, sharing heavily in the decline the German auto industry is experiencing this year.
 
In this article we examine BMW's situation and, above all, assess the opportunities for investors.

What's going on with BMW?

BMW is currently facing several major issues affecting its global business. One of the main concerns is a recall involving 1.5 million vehicles due to problems with their integrated braking systems. This defect affects models produced between 2023 and 2025, including several series and SUVs such as the X5 and X7. The recall has led to disruptions in vehicle deliveries and dealer operations

In addition, BMW is recalling more than 140,000 Mini Cooper SE electric vehicles due to concerns about possible battery overheating, which could lead to thermal overheating. This recall mainly affects vehicles produced between 2020 and 2024.

These concerns have caused BMW to lower its profit expectations for 2024, as the company expects significant warranty costs and demand will decrease in key markets such as China.

The development of BMW in a chart

Below you can see BMW's price chart from 2017. Clearly visible is the dip at the COVID19 breakout in 2020 and the rebound to mid-2021. Furthermore, we see that the group's share price has been setting a double top since the end of 2022 and completing the full M pattern. The crucial inquiry, naturally, is whether this M pattern will be succeeded by a W pattern, leading to a potential further decline in the price. We'll delve into that shortly. 

For the complete technical picture, below you will find BMW's price performance plotted against Volkswagen(dark red line) and plotted against the development of the German auto industry (purple line). It is clear that BMW is moving up nicely with the industry and that Volkswagen has lagged far behind since the end of 2022.
 

What can we expect from BMW's stock price

In last week's article, we concluded that at Volkswagen, the problems now seem to be largely behind us, which presents opportunities. At BMW, however, the situation is different. BMW is also struggling with operational challenges and facing declining electric vehicle (EV) sales, as well as a recent profit warning. Nevertheless, the share price is not at its lowest point; the technical support at €68 continues to hold up well.

Technically, this is a positive sign in the short term, but for the future we must remain cautious. BMW, like the entire European auto industry, has suffered substantial losses this year and is not showing exceptional price movements within the sector. However, with the strong support at €68 as a base, we can expect a short-term rebound towards €87. This would be a technical recovery within a downtrend.

In addition, we have previously pointed out the risk of a W pattern, which means that the price may experience a volatile decline after an earlier M formation. This technical analysis fits closely with the challenges facing the company. It seems that at BMW the so-called poison cup is not yet empty.

Below is the chart of BMW with the expectation and possibility plotted. The gray arrow is the first line of the W.



Below is the image that shows the M pattern (late 2022-present) which may be followed by the W pattern as plotted with gray arrowsand we discuss below. 

Conclusion

For the short term, we expect a technical recovery to €87. After that it becomes watchful. BMW's problems will most likely not be solved in the short term. As soon as the price drops below € 68, it could fall back to the old bottom around € 40.  

Here comes the long-term buying moment where we have to take into account a rebound to €58 and then another rebound to the €40 level to then complete the W pattern through a sharp rise to at least €68 and possibly through to €87.

Disclaimer: Investing involves risk. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. They are therefore for educational purposes only.