No automotive company is immune to fluctuating sales; it’s part of the business. However, in recent years, BMW has relied on China as a stabilizing force to mitigate slow sales cycles. This reliance has now been tested, as BMW reported a sales decline in China for Q2. BMW along with a small clutch of automakers are grappling with a demand slowdown.

The decline in revenue was attributed to increased competition and weaker demand in China. Vehicle deliveries in the world’s largest auto market fell by 4.7 percent in the quarter, impacted by a real estate crisis that has dampened consumer spending. The slowdown in China is affecting demand across various premium sectors, including cars, watches, and designer clothing.

The company reported a 9 percent decline in net income, dropping to €2.7 billion ($2.9 billion) for the quarter, as announced on August 1. Earning before income and tax was 8.4 percent, down from 9.2 percent during the same period last year and at the lower end of its 8 percent to 10 percent full-year target. Despite this, BMW has reaffirmed its annual guidance.

To navigate this challenging market, BMW is increasing prices across its lineup and adjusting sales targets for dealers in China to avoid a damaging price war. The automaker anticipates that the economic situation in China will stabilize starting in the current quarter.

In addition, higher manufacturing and personnel costs, along with expenses related to IT projects, have also contributed to the earnings decline.

BMW has achieved success in the electric vehicle (EV) sector. Global deliveries of its battery-powered models, such as the i4 and iX1, surged 22 percent in the quarter, outperforming rivals Mercedes Benz and Audi. BMW attributes this growth to its compelling product portfolio in a tough market.