What to do if most of the students did badly in the 1st midterm? What to do if the average of the 1st midterm is like 35%?
Should I repeat the exam? should I ask them to redo the problems in which most of them did poorly in the exam and average the old score and the new score?
Other suggestions?

(The level of the exam is not different from past exams, where the average was around 60%. Same learning outcomes, same everything as past semesters. The only difference I made this semester was to break each question into sub questions, each of which will target certain concept in the main question. Students usually have the habit of asking for partial credits for writing relevant equations without knowing how to use them properly. I made that change to see how clear they understand things and to make grading scheme less ambiguous. I have already trained them on similar problems and concept questions in class, but it seems that they did not take it seriously or they are not used to that, I am not sure)

An Update: I regraded some papers using the same way I graded papers in past semesters (just by looking at the overall solution of each question) and the average became slightly higher (~40)
What I usually do, and this would also apply in this situation: I tell the students that if their performance improves significantly in the final exam, and if any of the remaining exams/quizes, I am willing to ignore the grade for the first midterm when I calculate their grades.

But they have to prove that the first midterm was an accident. 

This usually motivates them to work harder for the remaining of the class, and for some students a poor first midterm is a good wake up call.