Major car brand forced to slash sales targets after 1.5 million vehicles recalled over faulty brakes

The recall stems from problems with the Integrated Braking System (IBS) supplied by Continental, which will have a "negative worldwide sales effect in the second half of (2024)", according to BMW.

Estimates put the financial impact to be in the "high three-digit million" euro range for the third quarter alone.

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The revised guidance includes a significant reduction in BMW's earnings before interest and taxes (EBIT) margin for the automotive segment, now forecast at six per cent to seven per cent, down from the previous eight per cent to 10 per cent.

Despite these setbacks, BMW remains optimistic about generating free cash flow above €4billion (£3.37billion) for the year, although this is unlikely to alleviate concerns over short-term profitability pressures.

The company cited ongoing muted demand in China as a contributing factor to the revised outlook, noting that "consumer sentiment remains weak" despite government stimulus measures.

BMW's recent performance has been marred by challenges. In the second quarter, the company reported an 8.6 per cent drop in net profit to €2.7billion (£2.28billion) attributed to weaker business in China and higher manufacturing costs.

Despite these setbacks, BMW briefly outpaced Tesla in European battery electric vehicle registrations in August, marking a significant achievement.

However, the current technical issues and Chinese recall have dampened this momentum, leading to the revised financial outlook and potentially impacting BMW's competitive position in the EV market.

Continental, a major German auto parts supplier, has been identified as the provider of the problematic Integrated Braking System (IBS) affecting BMW vehicles.

BMW's motorcycle segment has also been affected by the challenging market conditions. The company now expects motorcycle deliveries to remain flat year-on-year, revising its earlier forecast of a slight increase.

The EBIT margin for motorcycles has been adjusted downward to six per cent to seven per cent, a significant reduction from the previously guided eight per cent to 10 per cent.

According to data from the Society of Motor Manufacturers and Traders (SMMT), BMW has sold 84,278 cars this year in the UK, enough for an impressive 6.8 per cent market share.

It is also a huge 28 per cent jump in sales compared to the same time last year, when just 65,693 vehicles were sold, worth 5.57 per cent of the 2023 year-to-date market.

The full quarterly results and adjusted outlook report will be published on November 6 in the BMW Group Quarterly Statement to September 30, 2024.

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BMW currently has a number of electric vehicles on the market including the i4, i5 and i7 saloon coupes, as well as the iX, iX1, iX2 and iX3 SUVs.