BMW shares fell after the carmaker revealed it will have to recall 1.5 million vehicles due to a brake problem, costing it almost 1 billion euros (0.84 billion pounds).
The German automaker said its annual profits would be considerably lower than expected as the now-discovered brake system fault is much more widespread than originally thought.
Although BMW said the problem with the braking system on some new models was not a safety issue, the additional cost under warranty would be “high triple-digit amounts in the millions.”
The carmaker said weak demand from China will also hurt its profits, with margins expected to be around 6% instead of 10%. BMW’s share price fell around 11% to a four-year low on Tuesday.
The update is the latest blow to the German car industry, which is reeling from Volkswagen’s announcement that it may have to close factories. Factory closures in Germany would be a first for the carmaker.
While BMW stressed that the brakes on the cars covered by the recall continue to function and it is not aware of any incidents caused by the problem, it is understood that the fault in the electronic brake assist system could affect how hard drivers have to press the brake pedal to stop the car.
The system, made by Continental, is used in a range of BMW models that have rolled off production lines since June 2022, including the BMW X1, X2 and X5 SUVs, the Mini Cooper and Countryman, and the luxury Rolls-Royce Spectre. It is understood that only a small fraction of cars potentially have the system malfunction. These would have been made at BMW plants in Germany, the UK and France, as well as in the US, China and South Korea.
Continental said only a “small proportion” of the brake systems it produces for BMW would be partially replaced because of an electronic component that it said “could have impaired functionality.”
Continental’s estimate of the financial provision it needed to cover the warranty was a fraction of BMW’s, in the “double-digit million” range. Shares in the German firm, also known for its tires, fell about 9%.
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BMW said about 1.2 million of the affected vehicles had already been delivered to customers and could be remotely checked for faults using over-the-air software updates. However, about 320,000 new cars would see their delivery delayed, dampening sales in the second half of the year.
When the problem first emerged in February, it was believed that around 14,000 UK-registered vehicles were affected. Nearly 160,000 new BMWs and Minis were sold in the UK last year.
