BERLIN (Reuters) -BMW shares fell as much as 7% on Wednesday after the luxury automaker cut its 2025 earnings forecast, citing delays in U.S. and German customs refunds and continued weakness in China as trade tensions cloud its prospects.

The German company said late Tuesday it now expected pretax earnings to decline slightly this year, against previous guidance for a flat outcome versus 2024.

"The tariff news is disappointing, especially given our expectation that BMW could be well-positioned on tariffs vs peers," said RBC analysts about the carmaker whose biggest plant is in the U.S. and is Germany's top auto exporter by value.

EARNINGS AND CASH FLOW GUIDANCE CUT

Citing delays to refunds from customs, BMW halved expectations for free cash flow from its automotive business to above 2.5 billion euros ($2.9 billion), and narrowed its profit margin forecast for that business to 5-6% from 5-7%.

The automaker, which exports a range of SUV models to Europe from its U.S. plant, still assumes that the European Union will retroactively implement a tariff reduction to zero from current import duties of 10% following an EU-U.S. framework trade deal.

However, it expects a high three-digit million figure in customs reimbursements from the U.S. and Germany only next year.

UBS and JP Morgan said the timing of the tariff refund was not a big issue, and the focus should be more on the China-related reasons for the guidance cut.

"More important than the impact of tariffs will be the firm's ability to stabilise the volume momentum and pricing power in China in FY26, which will ultimately ensure the longer term competitiveness of the group," JPMorgan analysts wrote.

BMW said on Tuesday that while sales had risen in Europe and the U.S. in January-September, sales in China were below expectations.

Shares in German rival Mercedes Benz, which also reported declining sales due to tariffs and weakness in China on Tuesday, were down 3.5%.

BMW will publish its full quarterly results on November 5.

($1 = 0.8610 euros)