German carmaker BMW has cut its full-year outlook as a result of a braking system malfunction that has prompted the recall of over 1.5 million vehicles. The issue, supplied by Continental, affects several BMW models, including Mini Cooper and Rolls-Royce. Following the announcement, BMW shares dropped by 11%, reaching a four-year low. This news adds to the recent struggles in the European car industry, with Volkswagen also facing challenges. Continental AG’s shares also fell sharply following the news.
In response to the braking system problem, BMW has revised its forecast for 2024, predicting a decrease in car deliveries and lowering its EBIT margin expectations. The technical issues are expected to lead to additional warranty costs in the third quarter. The company also cited sluggish demand in China as a factor affecting sales. The negative impact is anticipated to be more significant in the third quarter compared to the fourth quarter of this year.
The European car-making industry is facing economic challenges, with rising labor costs, transitioning to green energy, and competition from Chinese electric vehicles. The recent EU proposal for tariffs on Chinese EVs could lead to retaliatory measures that would affect European-made gasoline car exports to China. Despite the rise of electric vehicles in China, German high-end cars remain popular imports.
Overall, BMW’s struggles highlight the broader issues facing the European car industry, with Volkswagen’s recent considerations of cost-cutting measures adding to the sector’s challenges. This news has also impacted European stock markets, with the Automobiles & Parts sector seeing a significant drop.
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