BMW Lowers 2024 Profit Forecast as 1.5 Million Cars Await Brake Fix

Introduction

The BMW Group is facing a drop in deliveries and has revised its profit forecast due to a braking system fault affecting over 1.5 million cars globally. The issue involves an integrated braking system (IBS) component supplied by Continental, which determines the brake pedal’s feel and feedback. This fault has prompted a recall and halted deliveries of Mini Cooper and Countryman models.

The Braking System Fault

The affected models, manufactured between June 2022 and now, have defects in the anti-lock braking and stability control systems. These defects can potentially cause the power braking assistance to fail, leading to a loss of control for the driver. However, the BMW Group assures that all affected cars are safe to drive while awaiting a fix, and no accidents related to the IBS have been reported globally.

Global Impact

More than 1.5 million cars worldwide, including those yet to be delivered, are fitted with the faulty IBS components. The BMW Group is working with the Driver and Vehicle Standards Agency (DVSA) on a repair program and will hold any affected cars until the necessary components are replaced. As a result of this technical action, the company expects a slight decrease in deliveries compared to the previous year.

Financial Implications

The BMW Group anticipates warranty costs in the “high three-digit million” range due to the IBS issue. Consequently, it has revised its profit margin forecast from 8-10% to 6-7%. This adjustment, along with stifled demand in China and ongoing competition in core markets, has led to an 8% drop in BMW’s shares and a 9% drop in Continental’s shares.

Resolution and Future Outlook

The BMW Group has extended the recall to include additional BMW and Mini models after identifying cases beyond the original scope. The company is in discussions with the DVSA and will soon announce the intended remedy actions. It expects the third quarter of this year to be the most impacted and will release full figures on November 6th.