BMW cuts 2024 outlook on Continental brake issues, shares plunge

11 September 2024 - 09:16 By Reuters
subscribe Just R20 for the first month. Support independent journalism by subscribing to our digital news package.
Subscribe now
BMW said it now expects its margin on earnings before interest and tax to be between 6% and 7% for 2024, having previously guided for a figure between 8% and 10%.
BMW said it now expects its margin on earnings before interest and tax to be between 6% and 7% for 2024, having previously guided for a figure between 8% and 10%.
Image: Leonhard Simon/Getty Images

BMW cut its 2024 profit margin outlook on Tuesday due to sluggish demand in its key Chinese market and problems related to a braking system supplied by Continental, sending the carmaker's shares to a near two-year low.

Shares in BMW tumbled nearly 12%, on track for their biggest intraday loss in four-and-a-half years, while Continental shares were also down more than 10%, making them the top decliners on Germany's benchmark DAX index and also dragging down European car stocks.

BMW said delivery holdups linked to the braking system would have a negative sales effect in the second half of the year, adding more than 1.5-million cars were affected.

About 1.2-million of those vehicles have already been delivered to clients and can be remotely checked for faults via over-the-air software, but the remaining 320,000 vehicles cannot be handed over for now, BMW said.

Overall, BMW said it will incur “a high three-digit million amount” in warranty costs in the third quarter as a result.

BMW also flagged ongoing muted demand in China affecting sales in the country, joining the group of carmakers facing difficulties in the world's second-biggest economy, which is also the world's largest car market.

“With China only getting tougher, and BMW overexposed to China, and with H2 recovery expectations looking a bit optimistic, it remains tough to see the positive catalyst for BMW,” Citi analysts wrote.

The German luxury carmaker said it expects its margin on earnings before interest and tax to be between 6% and 7% for 2024, having previously guided for a figure between 8% and 10%.

Deliveries are expected to fall slightly in 2024, while the group previously forecast a slight increase.

Continental said only a “small proportion” of the braking systems it produces and supplies to BMW would be partially replaced due to an electronic component it said is possibly impaired.

The car supplier said it had set aside provisions in the mid double-digit million euro range and it assumes this amount will cover the warranty.


subscribe Just R20 for the first month. Support independent journalism by subscribing to our digital news package.
Subscribe now

Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.