BMW Group, the German automaker that owns BMW, Mini, and Rolls-Royce brands, has announced a global recall of over 1.5 million vehicles due to a faulty integrated braking system.
The recall is expected to cost the company an estimated $1 billion, significantly impacting its sales and earnings for the fiscal year 2024. BMW released the news to investors that the company will have “additional warranty costs in a high three-digit million amount in the third quarter.”
The recall affects a wide range of BMW models, as well as Minis and a Rolls-Royce. According to BMW, approximately 1.53 million vehicles across five countries are affected:
- China: 370,000 vehicles
- United States: 270,000 vehicles
- Germany: 150,000 vehicles
- South Korea: 70,000 vehicles
- France: 60,000 vehicles
In the United Kingdom, it remains unclear how many vehicles are due to be called back, although BMW initially believed around 14,000 UK cars were affected in February.
Between January 2022 and August 2024, BMW Group sold 339,122 new BMWs and Minis in the UK. Of the 1.53 million affected vehicles, 78% (approximately 1.2 million) are already in customer hands, amounting to $1.031 million. The remaining 320,000 vehicles ($352,512.02) are either with BMW or part of existing dealer stocks.
BMW has revised its financial outlook for 2024, citing both recall costs and weakening demand in China. The company now expects:
- Automotive segment’s earnings before interest and taxes (EBIT) margin to be between 6% and 7%, down from the previous range of 8% to 10%
- Annual return on capital employed to be between 11% and 13%, down from 15% to 20%
- A slight decrease in worldwide deliveries, compared to the previously predicted slight increase
As a result of the recall announcement, BMW shares fell more than 11% on Tuesday, while shares of Continental AG, the German auto supplier responsible for the faulty integrated brake system, dropped over 10%.
BMW has developed diagnostic software to detect the brake fault before it occurs. If a potential fault is detected, the driver will be alerted with a warning to visit a dealership for a free system replacement. In the unlikely event of a malfunction, the system should revert to a “safe mode,” ensuring that brakes work and meet legal standards, although drivers may need to apply more force when using them.
The recall is the latest setback for Germany’s automotive industry, which is already grappling with Volkswagen’s potential factory closures and the eurozone’s rapidly declining manufacturing sector.
