NEW YORK (AP) — BMW is lowering sales and earnings targets for the 2024 fiscal year, in a move the luxury German car maker said was partially triggered by hefty expenses of addressing a braking system recall that impacts more than 1.5 million vehicles worldwide.
Munich-based BMW Group said Tuesday that actions related to addressing a faulty integrated braking system, made by a supplier for the company, would reach “a high three-digit million (euro) amount” for the third quarter.
Halted deliveries for impacted vehicles not already in customer hands are also expected to negatively impact sales.
The affected vehicles were produced between June 2022 and August 2024, per BMW, and several models are covered.
That includes select BMW X models (excluding X3 and X4), the 5 and 7 Series, Rolls-Royce Spectre, MINI Cooper and Countryman.
Of the 1.53 million affected cars, 1.2 million are already in customer hands — while about 320,000 remain with BMW or in dealer stock.
German auto supplier Continental AG confirmed Tuesday that it makes this integrated brake system for BMW, and that the faulty component can cause the case to rely on its back up level.
The company said it had built accruals in a “mid-double digit million euro area” to cover warranty costs.
BMW also now anticipates a slight decrease in worldwide deliveries for 2024, compared to a slight increase that was previously predicted.
Shares for BMW fell more than 11% by of Tuesday afternoon, while Continental was down over 10%.
NEW YORK (AP) — BMW, the premium German automaker, announced that it is cutting its earnings and sales goals for the 2024 fiscal year. The company attributed this decision, in part, to the high costs associated with resolving a braking system recall that affects over 15% of all vehicles globally.
BMW Group, based in Munich, announced on Tuesday that it would spend “a high three-digit million (euro) amount” in the third quarter to rectify an integrated braking system that was manufactured by one of its suppliers. Sales are also anticipated to suffer from deliveries of affected vehicles that are not yet in the possession of customers being halted.
An email exchange with The Associated Press revealed that a representative for BMW Group—the company that also owns the Rolls-Royce and Mini brands—confirmed that the problem was initially discovered during an internal quality check. This led to a safety recall in February, but more cases that were “beyond the scope of the original recall” have been discovered since then. “.
BMW now projects that 1.353 million vehicles in five nations will be impacted, with roughly 370,000 in China and 270,000 in the U.S. s. 60,000 in France, 70,000 in Korea, and 150,000 in Germany.
BMW claims that the impacted cars, which span multiple models, were manufactured between June 2022 and August 2024. This covers a few models of the BMW X (not the X3 and X4), the 5 and 7 Series, the Rolls-Royce Spectre, the MINI Cooper, and the Countryman.
Approximately 320,000 of the 1:53 million impacted vehicles are still owned by BMW or in dealer inventory, leaving 1:2 million already in customer hands. Individual market delivery stops affect one-third of those vehicles, the company claims.
According to a representative for BMW, the business “has developed a diagnostic software to detect the brake fault before it occurs.”. The spokesperson continued, “If a potential brake issue is found, that should notify the driver with a warning to visit a dealership as soon as possible to receive a free system replacement. The system should also go into “safe mode” in the event of a malfunction, which BMW claims is “very unlikely” and ensures that the brakes function and meet legal requirements but necessitates drivers applying more force when using them.
On Tuesday, German auto supplier Continental AG verified that it manufactures this integrated brake system for BMW and that the case may have to rely on its backup level due to a malfunctioning component. Continental mentioned diagnostic software in a statement that can identify this possible problem “well before it occurs.”. “.
In spite of the fact that it anticipates that “only a small proportion” of the brake systems it has supplied will actually require replacement, Continental reaffirmed that the brake system may be replaced if such an impairment is found. In order to pay for warranty costs, the company claimed to have built accruals in a “mid-double digit million euro area.”.
In addition to the costs associated with the braking system recall, BMW said in its financial outlook update on Tuesday that “ongoing muted demand” in China in particular is having an impact on sales volumes because consumer confidence is still low despite government stimulus measures.
BMW is reducing its automotive segment’s 2024 earnings before interest and taxes margin, a crucial profitability metric, from a previous range of 8 percent to 10 percent. The company cites recall costs in addition to declining demand in China. Furthermore, instead of 15 to 20 percent, the company now projects an annual return on capital employed of between 11 and 13 percent.
In addition, BMW has revised its forecast for 2024 to reflect a slight decrease rather than the previously expected slight increase in global deliveries.
By Tuesday afternoon, shares of BMW had dropped over 11%, while shares of Continental had dropped over 10%.
