BMW has announced a recall of approximately 1.5 million vehicles globally due to a brake-related issue, further dampening its sales outlook for 2024. This recall comes at a time when the German luxury carmaker is grappling with slowing demand in key markets, especially China. The company stated that the recall, coupled with ongoing muted demand in China, will negatively affect its sales in the second half of the year. This development caused BMW’s shares to plunge by nine percent on the Frankfurt Stock Exchange, marking a significant setback for the automaker.
The braking system at the center of the recall was supplied by Continental, according to a source close to the matter. Although BMW did not specify the exact nature of the problem, the automaker acknowledged that the recall would have a substantial financial impact. In a statement, the company noted that it expects losses in the “high three-digit million” euro range for the quarter ending in September. This, along with the ongoing challenges in China, led BMW to revise its vehicle delivery forecast for 2024, with the company now predicting a slight decrease compared to last year’s figures. In 2023, BMW delivered 2.56 million vehicles under its BMW, Rolls-Royce, and Mini brands.
The recall is yet another blow to the German automaker, which has been facing headwinds from weaker demand in China, its largest single market. Despite efforts by the Chinese government to stimulate consumer spending, sentiment remains subdued, particularly in the automotive sector. BMW reported a drop in net profit during the second quarter of 2024, attributing this decline to poor performance in China and higher manufacturing costs. Net profit for the April-June period fell by 8.6 percent to 2.7 billion euros ($2.9 billion), while revenues dipped slightly by 0.7 percent to just under 37 billion euros.
BMW’s latest recall follows a similar recall of 1.4 million vehicles in China in August 2024, where faulty airbags prompted action by the country’s market regulator. While recalls are not uncommon in the automotive industry, the scale and timing of BMW’s recent recalls have raised concerns about the company’s ability to recover quickly, particularly as it faces increasing competition from electric vehicle manufacturers and pressure from regulatory authorities to transition to greener technologies.
Adding to BMW’s challenges, the broader German auto industry is also feeling the strain. Just last week, Volkswagen, another major player in the industry, announced that it was considering the unprecedented step of closing some of its factories in Germany due to weak global demand. The combined impact of these developments has created a difficult environment for German automakers, who are now forced to balance the pressures of sustainability with the realities of market fluctuations and shifting consumer preferences.
BMW also adjusted its profitability outlook for the remainder of 2024. The company now expects its profit margins to be between six and seven percent, down from its previous guidance of eight to ten percent. The automaker’s revised outlook is reflective of the broader struggles facing the industry, as carmakers navigate through supply chain disruptions, inflationary pressures, and sluggish demand in key markets.
Despite these setbacks, BMW remains a leader in the luxury automotive space and continues to invest in its transition toward electric mobility. The company has been steadily increasing its production of electric and hybrid vehicles as part of its long-term strategy to meet emissions targets and capture market share in the growing electric vehicle segment. However, the immediate challenges posed by recalls, weakening demand, and profitability concerns have dampened BMW’s short-term prospects.
As the company works to resolve the brake issue and address its broader financial challenges, the coming months will be critical for BMW’s recovery. The recall, coupled with the slow recovery of the Chinese market, signals that the remainder of 2024 will be a tough period for the automaker as it strives to regain its footing and restore investor confidence.
