(TheIndependentStar.com) – In a far-reaching move, BMW has announced that it is recalling approximately 1.5 million vehicles due to brake issues, prompting the German luxury carmaker to reduce its financial forecast for the year.
This announcement caused a significant drop in the company’s stock value, Insider Paper reports.
The group, which encompasses the Rolls-Royce and Mini brands as well, anticipates a substantial financial hit in the second half of the year due to this issue.
The financial repercussions for the quarter ending in September are expected to be in the “high three-digit million” euro range, according to the company.
This setback is part of a series of challenges for BMW, including a decrease in demand from China.
This issue comes shortly after Volkswagen considered the drastic action of shutting down factories in Germany due to similar challenges.
The problematic braking system was supplied by Continental, another German auto component supplier.
Continental has stated that it will replace the affected component if any issues are detected.
However, the company reassured that “braking performance is not compromised and brakes can always be applied” even if the defect is found.
BMW also noted that the ongoing subdued demand in China continues to impact sales negatively.
Despite government efforts to boost the economy, consumer confidence remains low, affecting sales volumes.
Originally anticipating an increase in vehicle deliveries for the year, BMW now expects a slight decline compared to last year’s total of 2.56 million vehicles delivered across all its brands.
Furthermore, BMW has adjusted its profitability expectations, now projecting profit margins to range from six to seven percent, a decrease from the previously anticipated eight to 10 percent.
Following these announcements, BMW’s shares fell by 11 percent on the Frankfurt Stock Exchange, and Continental’s shares dropped by 10.5 percent.
Additionally, last month BMW recalled 1.4 million vehicles in China due to issues with airbags, as reported by the country’s market regulator.
The automaker also experienced a decline in net profit during the second quarter, which it attributed to the reduced business in China and increased manufacturing costs.
The net profit for the group fell by 8.6 percent to 2.7 billion euros, with revenues slightly decreasing by 0.7 percent to just under 37 billion euros.
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