German carmaker BMW was forced to cut its annual targets on Tuesday due to a fault in its vehicles’ brake system, which prompted the group to recall or halt deliveries of 1.5 million vehicles.
The problems relate to the Intelligent Braking System (IBS) linked to a “supplier” whose name and technical details BMW has not revealed.
But Bloomberg reported that German equipment manufacturer Continental is the only company that supplies BMW with these systems, which it uses in its BMW, Mini and Rolls-Royce brands.
People close to the company, which is headquartered in the German state of Bavaria, confirmed this information to Agence France-Presse.
As a result of these recalls, BMW deliveries are expected to decline slightly in 2024 on an annual basis, while they were initially expected to increase slightly, after a record level of 2.56 million units in 2023.
This will also affect the group’s profitability, as the operating margin in BMW’s automotive business – a key division of the company – is expected to range between “6% and 7%”, compared to 8% to 10% previously, according to a company statement.
The company’s profitability decline is also due to the ban on the delivery of many cars, in addition to weak performance in the Chinese markets.
Taxable income for the group, which also makes motorcycles, is also expected to fall sharply, after previous forecasts of a slight decline.
Warranty costs for technical measures related to the recall in the third quarter are expected to amount to a three-digit million euro amount.
On the Frankfurt Stock Exchange, shares of BMW and Continental lost more than 7% following the announcement.
