BMW has announced a massive recall of 1.5 million vehicles worldwide due to issues with the Integrated Braking System (IBS) supplied by Continental, forcing the company to lower its annual targets and profit expectations. The recall affects BMW, Mini, and Rolls-Royce models. As a result, BMW expects a slight decrease in vehicle deliveries for 2024, contrary to the previous forecast of a slight increase following the record 2.56 million units delivered in 2023.The company’s profitability will be significantly impacted, with the operating margin in the automotive division now expected to be between 6% and 7%, down from the previous 8% to 10%. BMW’s taxable profit is expected to ‘decline significantly’ rather than ‘slightly’ as previously anticipated. The company estimates additional warranty costs in the ‘high three-digit million’ range.Following the announcement, BMW’s stock price plummeted by approximately 8%, with Continental’s stock also falling by about 7%. The issue has sent shockwaves through the entire industry, with shares of competitors and suppliers also declining.Adding to BMW’s challenges is the persistently weak demand in the Chinese market, a key region for the company. ‘Despite government support measures, purchasing reluctance persists,’ BMW stated.This situation is part of a broader crisis in the German automotive industry. Volkswagen recently announced significant cost-cutting measures, including potential factory closures and layoffs in Germany. The industry is grappling with general location problems, transformation costs, weak business in China, and declining demand for electric vehicles in Europe.BMW will provide detailed quarterly results and revised forecasts in its quarterly report for September 30, 2024, expected to be published on November 6, 2024.
Key points
- BMW recalls 1.
- BMW lowers profit expectations, with automotive division operating margin now expected to be 6-7% instead of 8-10%.
- The recall and profit warning have caused BMW’s stock to fall by about 8%, impacting the entire automotive sector.
- BMW faces additional challenges from weak demand in the Chinese market.
5 million vehicles due to issues with the Integrated Braking System supplied by Continental.
