BMW announced on Tuesday that it was recalling around 1.5 million vehicles owing to brake concerns and lowered its year-end outlook, sending the German luxury carmaker’s shares plunging.
The recall will have a “negative worldwide sales effect in the second half of the year,” according to the firm, which also owns the Rolls-Royce and Mini brands.
The financial impact for the three months ending in September will be in the “high three-digit million” euro level, according to the report.
It was terrible news for BMW, which has been impacted by falling Chinese demand, as well as the broader German auto sector, after Volkswagen announced last week that it was considering closing operations in Germany.
Continental supplied the brake system that caused the problems, according to a source familiar with the situation.
As well as the impact of the recall, “the ongoing muted demand in China is affecting sales volumes. Despite stimulus measures from the government, consumer sentiment remains weak,” BMW said in a statement.
BMW, headquartered in Munich, now forecasts a modest decline in car deliveries this year compared to last year, after previously forecasting a slight increase.
It did not provide a precise figure. In 2023, BMW, Rolls-Royce, and Mini vehicle deliveries totaled 2.56 million.
The manufacturer also reduced its profitability projection, expecting margins of six to seven percent this year, down from eight to ten percent previously.
The carmaker’s shares fell nine percent on the Frankfurt Stock Exchange following the announcement.
Last month, the Chinese market regulator reported that BMW had recalled 1.4 million vehicles owing to malfunctioning airbags.
BMW’s net profit fell in the second quarter as a result of slower activity in China and rising manufacturing expenses.
Between April and June, the group’s net profit fell 8.6 percent to 2.7 billion euros ($2.9 billion), while revenues fell 0.7 percent to slightly less than 37 billion euros.