BMW has initiated a recall of 1.5 million vehicles, including its BMW, Mini, and Rolls-Royce brands, due to a faulty braking system supplied by Continental. Although the braking performance remains within legal standards, the affected components will be replaced where necessary. This recall has forced BMW to lower its 2024 targets, predicting a slight decline in vehicle deliveries and a reduction in operating margins from an anticipated 8-10% down to 6-7%. The company’s profitability has also taken a hit, with taxable income expected to drop significantly.
The recall exacerbates challenges for BMW amid weakening demand in key markets, particularly China, where sales of the i6 electric sedan have been sluggish. Despite government efforts to boost the market, consumer reluctance persists. BMW’s third-quarter results, expected in November, will provide more insight into the financial impact of the recall and the broader market conditions. The recall and market difficulties follow other setbacks in the German automotive sector, with Volkswagen recently announcing a drastic savings plan and potential factory closures.
On the Frankfurt Stock Exchange, BMW and Continental saw their shares drop by more than 10% following the recall announcement.
