BMW announced on Tuesday that it is recalling approximately 1.5 million vehicles due to brake issues and has reduced its financial outlook for the year, causing its shares to plummet.
The recall is expected to have a “negative worldwide sales effect in the second half of the year,” affecting not only BMW but also its Rolls-Royce and Mini brands. The company estimates the financial impact for the quarter ending in September will be in the “high three-digit million” euro range.
This setback adds to BMW’s challenges, including declining demand in China, and comes amid broader issues in the German automotive sector. Last week, Volkswagen indicated it might consider closing factories in Germany.
A source close to the situation revealed that the braking system issues stem from components supplied by Continental.
In addition to the recall, BMW cited ongoing weak demand in China despite government stimulus measures, which has dampened consumer sentiment and affected sales volumes. As a result, BMW now anticipates a slight decrease in vehicle deliveries this year compared to last, reversing its previous forecast for a slight increase. The company delivered 2.56 million vehicles, including BMW, Rolls-Royce, and Mini, in 2023.
The automaker has also lowered its profitability forecast, expecting margins to fall between six and seven percent this year, down from the earlier estimate of eight to ten percent.
Following the announcement, BMW’s shares dropped by nine percent on the Frankfurt Stock Exchange. Additionally, BMW recalled 1.4 million vehicles in China last month due to faulty airbags, according to the country’s market regulator.
The company reported an 8.6 percent drop in net profit for the second quarter, falling to 2.7 billion euros ($2.9 billion) amid a 0.7 percent decline in revenues to just under 37 billion euros, largely due to weaker performance in China and increased manufacturing costs.