BMW recalls more than 1.5 million vehicles due to braking system issues and downgrades its 2024 outlook

On September 11, 2024, news from New York. German luxury carmaker BMW is lowering its sales and earnings targets for fiscal 2024 mainly due to the huge costs of addressing a braking system recall and continued weak demand in the Chinese market.

The BMW Group said the recall affects more than 1.5 million vehicles globally. The actions related to resolving the faulty integrated braking system produced by suppliers will reach a "high triple-digit million (euro) amount" in the third quarter. The affected vehicles were produced between June 2022 and August 2024 and cover multiple models, including some BMW X series (excluding X3 and X4), 5 Series and 7 Series, Rolls-Royce Spectre, Mini Cooper and Countryman. Among them, about 370,000 in China, 270,000 in the United States, 150,000 in Germany, 70,000 in South Korea and 60,000 in France are affected. 1.2 million are already in the hands of customers, and about 320,000 are in BMW's or dealers' inventories.

BMW has developed diagnostic software that can detect problems before a brake failure occurs and issue warnings to the driver. When a failure occurs, the system can also return to a safe mode, but the driver needs to apply greater force. German automotive supplier Continental Group confirmed that it produced the integrated braking system for BMW. The faulty part may cause the braking system to rely on a backup level, and it has set aside provisions in the "mid double-digit million euro range" to cover warranty costs.

In addition to recall costs, in the Chinese market, despite government stimulus measures, weak consumer confidence has affected sales. In view of this, BMW has lowered the 2024 pre-tax profit margin of its automotive division to 6% to 7%, lower than the previous range of 8% to 10%, and adjusted the annual return on capital to 11% to 13%, lower than the previous 15% to 20%. At the same time, it is expected that global deliveries in 2024 will decline slightly. As of Tuesday afternoon, BMW's share price fell by more than 11%, and Continental Group's share price fell by more than 10%.