BMW Faces Major Recall: 15 Million Vehicles Affected Due to Braking Issue
Shares in BMW have plummeted following the carmaker's announcement of a massive recall affecting 15 million vehicles because of a braking issue that could cost nearly $1 billion. The German automobile manufacturer revealed that its annual earnings would be significantly lower than previously anticipated, as the flaw in the braking system has now been found to be more widespread than initially thought.
Despite emphasizing that the braking issue in newer models is not a safety concern, BMW disclosed that the increased warranty costs associated with the recall would amount to a high three-digit million figure. Additionally, the company has pointed to sluggish demand in China as a contributing factor to lower profits, with profit margins projected to be around 6% instead of the previously expected 10%.
The announcement sent BMW’s share price tumbling by about 11%, reaching a four-year low on Tuesday. This incident marks yet another setback for Germany's automotive industry, which has recently suffered after Volkswagen hinted at the potential closure of factories within the country for the first time in its history.
BMW clarified that while the braking systems in the vehicles involved in the recall continue to function, there could be an impact on the effort required by drivers to press the brake pedal effectively. The electronic braking support system at the center of the issue, produced by Continental, is featured in several BMW models manufactured since June 2022, including the BMW X1, X2, X5 SUVs, Mini Cooper, Countryman, and even the luxury Rolls-Royce Spectre.
It has been noted that only a small fraction of the potentially affected vehicles are believed to have the malfunction, which encompasses those produced at BMW’s plants in Germany, the UK, France, the US, China, and South Korea. Continental has assessed that only a small portion of its braking systems for BMW will require partial replacement due to an electronic component that may exhibit impaired functionality, estimating its financial provisions for the warranty in the lower double-digit million range. As a result, shares in Continental also faced a decline, dropping about 9%.
Currently, approximately 12 million of the impacted vehicles have already been delivered to customers, who could have their cars remotely checked for faults via wireless software updates. However, about 320,000 new vehicles are expected to experience delivery delays, impacting sales forecasts for the second half of the year.
When reports of this problem first emerged in February, around 14,000 vehicles registered in the UK were thought to be affected, with nearly 160,000 new BMWs and Minis sold in the UK last year. The future does not appear particularly bright for BMW or the broader German automotive industry as they grapple with these challenges.
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