Citi Investment Research downgraded BMW AG (BMWG.DE) to "neutral" from "buy," and said a slowdown in China and the Asia-Pacific region signals that emerging markets can no longer drive the automaker's stock.
BMW said in May that China was its biggest single market for the first quarter.
China's burgeoning affluent class helped the premium car industry break one quarterly record after another, though demand remained stagnant in Europe.
However, the country's auto market growth is slowing at all levels and inventories are rising. Daimler AG (DAIGn.DE) and Nissan Motor Co's (7201.T) luxury brand Infiniti have already reported sharp discounting there, the brokerage said.
"It would seem the emerging markets story driving BMW's share price is finished for now," Citi analysts wrote in a note.
Weak demand in Europe — which contributes 30 percent of BMW's revenue — also won't help the company, especially as the UK and Germany has started weakening, the brokerage said.
"The United Kingdom is back in recession, car sales are slowing and pricing is increasingly tough as used prices come under pressure," Citi said.
"It is not easy to continue to suggest that the European impact on BMW will remain irrelevant," Citi said and cut its price target on the stock to 60 euros from 75 euros.
Car sales in Europe in May reflect weak consumer confidence in the crisis-hit region, with the two biggest markets Germany and France posting falls from last year.
BMW shares, which have gained about 60 percent in the last four years, fell more than 3 percent to 53.16 euros on the Frankfurt Stock Exchange on Tuesday.
(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Joyjeet Das)