Around 1.5 million BMW cars recalled over defective brakes
What's the story
BMW, the renowned German luxury car manufacturer, has announced a global recall of approximately 1.5 million vehicles due to brake system defects. The company also revised its annual sales forecast downward, leading to a significant drop in its share value. "The recall will have a negative worldwide sales effect in the second half of the year," stated BMW, which also owns Rolls-Royce and MINI brands.
Financial fallout
Recall's financial impact and supplier revealed
BMW anticipates that the recall will result in a financial setback in the "high three-digit million" euro range for the quarter ending September. This development adds to BMW's existing challenges, including a slump in demand from China. An insider revealed to AFP that Continental supplied the faulty brake systems behind this massive recall.
Revised forecasts
Revised delivery expectations and profitability guidance
In addition to the recall's impact, BMW noted that "the ongoing muted demand in China is affecting sales volumes." The company now anticipates a slight decrease in vehicle deliveries this year, compared to 2023's figure of 2.56 million for BMW, Rolls-Royce, and MINI vehicles. Furthermore, BMW has revised its profitability guidance downward from eight to 10% previously, now expecting margins between 6-7% this year.
Market impact
Share value and previous recall in China
Following the announcement of the recall and revised forecasts, BMW's shares experienced a 9% drop on the Frankfurt Stock Exchange. This is not the first major recall for BMW this year. Last month, due to defective airbags, approximately 1.4 million vehicles were recalled in China as announced by the country's market regulator.
Financial performance
BMW reports Q2 net profit drop
BMW's financial performance has been negatively impacted by these developments. The company reported a decrease in net profit for the second quarter, attributing it to weaker business in China and increased manufacturing costs. Specifically, the group's net profit fell by 8.6% to €2.7 billion between April and June, with revenues also declining slightly by 0.7% to just under €37 billion.