BMW announced on Tuesday that it is recalling approximately 1.5 million vehicles due to brake issues and has revised its annual outlook, causing the German luxury automaker's shares to plummet. The company, which also owns Rolls-Royce and Mini, stated that this development will impact revenues in the second half of the year. The financial toll for the three months ending in September is expected to be in the 'high three-digit million' euro range.
This news comes as a further blow to BMW, which has already faced declining demand in China, and to the broader German automotive sector, following Volkswagen's announcement last week of considering the unprecedented move of closing factories in Germany. The braking system in question was supplied by Continental. The German auto supplier confirmed that the problematic component would be replaced if issues are identified. However, it assured that even if a fault is detected, 'braking performance is not compromised and brakes can always be applied'.
In addition to the recall, BMW noted that 'the ongoing muted demand in China is affecting sales volumes. Despite stimulus measures from the government, consumer sentiment remains weak'. The Munich-based company now anticipates a slight decline in vehicle deliveries this year compared to last, revising its previous forecast of a slight increase. BMW did not provide a specific figure, but in 2023, deliveries of BMW, Rolls-Royce, and Mini vehicles totaled 2.56 million. The automaker also adjusted its profitability guidance, expecting margins this year between six and seven percent, down from the previously forecasted eight to 10 percent.
BMW's shares closed 11 percent lower on the Frankfurt Stock Exchange, while Continental's share price dropped by 10.5 percent. Last month, BMW also recalled 1.4 million vehicles in China due to faulty airbags, as announced by the country's market regulator. The company reported a decline in net profit for the second quarter, attributed to weaker business in China and increased manufacturing costs. Net profit at the group fell by 8.6 percent to 2.7 billion euros ($2.9 billion) between April and June, with revenues dropping 0.7 percent to just under 37 billion euros.
