BMW alarms the entire sector with a reduced projection
BMW, the renowned automaker, is adjusting its yearly objectives. A problematic purchasing decision regarding a braking system is causing financial difficulties, leading to vehicle recalls worldwide for 1.5 million units. On top of this, BMW is experiencing challenges in the Chinese market. This unreliable situation has sent alarm bells ringing among investors. Consequently, shares of rival companies and suppliers are also plummeting.
Issuing a shockwave across the industry, BMW is reportedly dealing with significant hurdles with a third-party-purchased braking system. With a projected eight to ten percent profit margin now projected to be six to seven percent lower, the company's overall earnings are expected to decrease as well. BMW chose to remain discreet about the troubled supplier.
On the stock market, BMW's shares took a major dive, causing a similar descent in the share prices of competitors and various suppliers. The decrease in delivery forecasts has raised widespread concerns in the sector. There's a possibility that other manufacturers may follow suit in reporting similar predicaments. A trader voiced their concern, saying, "This is certainly a substantial setback for sales projections, particularly for suppliers with such thin profit margins." In this scenario, they risk falling inebriated in the red.
BMW's shares have dropped by eight percent. Continental isn't faring much better, with a seven percent decrease. Schaeffler, Mercedes-Benz, and VW are all down by up to five percent. In France, companies like Valeo and Forvia are experiencing sharp declines. The European automotive sector is down by 3.6 percent overall.
The root cause of BMW's revised forecasts is added liabilities in the automotive industry due to delays and recalls arising from a faulty integrated braking system (IBS) supplied by an external party. The system's issues have led to a halt in international deliveries for thousands of vehicles, pushing sales figures in the second half of the year below expectations. BMW anticipates these extra costs to be in the millions, in the triple-digit range.
Given the financial struggles BMW is facing due to issues with a third-party-purchased braking system, causing vehicle recalls and a decrease in profits, the manufacture of motor vehicles for the company has become challenging. This situation has also negatively impacted the stock prices of BMW's competitors and suppliers, causing a ripple effect in the automotive industry.
