German luxury carmaker BMW announced on Tuesday a massive recall of approximately 1.5 million vehicles worldwide due to potential issues with their braking systems, according to a report from France24.
The decision further clouded BMW’s outlook, as the company lowered its financial forecasts for the year, triggering a sharp decline in its stock price.
The recall is the result of a defective braking component supplied by German auto supplier Continental. BMW stated that while the affected vehicles may experience issues, braking performance remains intact. Continental has pledged to replace the faulty parts in any vehicles where problems are detected.
The recall comes at a difficult time for BMW, which has been grappling with declining demand in China, its largest market. Despite efforts by the Chinese government to stimulate consumer spending, sentiment remains weak, significantly impacting BMW’s sales volumes.
After announcing the recall, BMW revised its forecast for the year, now expecting a slight decrease in vehicle deliveries compared to 2023, when it sold 2.56 million vehicles across its BMW, Rolls-Royce, and Mini brands. Previously, the company had anticipated a slight increase in deliveries.
The financial implications of the recall are expected to be severe, with BMW estimating the impact in the “high three-digit million” euro range for the third quarter.
The development comes on top of an already challenging year, where the company’s net profit dropped by 8.6% in the second quarter, to EUR 2.7 billion (USD 2.9 billion). Revenues also took a hit, falling by 0.7% to just under EUR 37 billion.
In response to the situation, BMW has also lowered its profitability expectations for the year. The automaker now forecasts its profit margins will be between six and seven percent, down from the previous guidance of eight to ten percent.
The recall adds to a series of recent setbacks for BMW. Just last month, the automaker recalled 1.4 million vehicles in China due to faulty airbags, a decision prompted by the country’s market regulator.
The broader German auto industry is also feeling the strain, with rival Volkswagen recently hinting at the possibility of unprecedented factory closures in Germany due to weakening global demand.