The shares of BMW fell after the automaker announced it would have to recall 1,5m vehicles due to a brake problem. This will cost it nearly €1bn.
The German manufacturer stated that its annual earnings will be significantly lower than anticipated, as the problem with the brake system has now been discovered to be much more widespread than initially thought.
BMW has said that the brake system problem in certain new models is not a safety concern, but the warranty costs will be “in the high three-digit millions”.
The automaker also said that weak demand in China will affect its profits. Margins are expected to be around 6% instead of 10%. BMW’s stock price dropped by 11% on Tuesday, reaching a new four-year low.
This is the latest blow for Germany’s auto industry. It is still reeling after Volkwagen announced that it might have to close factories. This would be the first time that Volkswagen has closed a factory in Germany.
BMW has stated that brakes on the vehicles covered by this recall are still working and that it knows of no incidents caused by this issue. However, it’s understood that a fault in the electronic brake support system may affect the amount of force drivers need to apply to the brake pedal in order to stop their car.
Continental’s system is installed in a number of BMW models, such as the BMW X1, X2 and X5 crossovers, Mini Cooper and Countryman and luxury Rolls-Royce Spectre, that have been produced since June 2022. The system is believed to be malfunctioning in a very small number of cars. The cars would have been produced in BMW plants in Germany, the UK, France, the US, China and South Korea.
Continental stated that it would only be replacing a small proportion of the brake systems it manufactures for BMW due to a component electronic that “could have deteriorated functionality”.
Continental estimated that it would need to make a financial provision of “mid-double digit millions” in order to cover its warranty. This was less than BMW. The shares of the German company, which is also known for its tires, dropped by about 9%.
BMW stated that approximately 1.2m affected vehicles have already been delivered to customers and can be checked remotely for faults using wireless software updates. About 320,000 new vehicles will be delayed in delivery, which will reduce sales for the second part of the year.
Around 14,000 UK registered vehicles were thought to be affected when the problem was first discovered in February. In the UK, almost 160,000 new BMWs or Minis were sold last year.
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