BMW adjusts its 2024 anticipations due to brake problems and subdued demand in China.
BMW lowered its profit forecast for this year on Tuesday due to decreased sales in its primary market, China, and issues with a braking system provided by Continental. This led to the carmaker's shares nearing their lowest point in two years.
The German luxury car manufacturer mentioned that delays associated with the faulty braking system would negatively impact sales during the second half of the year. They added that over 1.5 million vehicles were affected, with more than 1.2 million already delivered and able to be inspected remotely for issues through over-the-air software. However, the remaining 320,000 units cannot be handed over to customers at this time, according to BMW.
As a result, the automaker expects to pay a "significant amount in the high three-digit million range" for warranty-related expenses in the third quarter.
BMW revised its estimated margin for earnings before interest and tax to be between 6% and 7% for the year 2024, down from its previous forecast of between 8% and 10%.
In a separate report, Continental, the car parts manufacturer, stated that only a "minor portion" of its supplied braking systems to BMW would be partially replaced due to an electronic component potentially being affected.
Furthermore, BMW pointed out the continued weak demand in China, which is negatively impacting sales in the country, making it one of the numerous automakers facing challenges in the world's second-largest economy and largest automobile market. The company noted that "consumer sentiment remains weak" despite government stimulus measures.
Due to the faulty braking system and the decreased sales in China, BMW is expected to incur significant warranty-related expenses, affecting its business profitability. The company has revised its earnings margin forecast for 2024, indicating a potential impact on its overall business performance.
