BMW’s financial picture for 2024 has dropped because of a big problem with its stopping system that caused over 1.5 million cars to be recalled. Continental’s bad brake systems are in a number of vehicles, such as the Mini Cooper, the Countryman, and the Rolls-Royce.
Continental has stated that only a few of the BMW brake systems it sells are broken. However, BMW thinks that this problem will have a big effect on its earnings before taxes this year. BMW’s stock dropped by 11% after the news came out, reaching its lowest point in four years on Tuesday.
This recall of brake systems has made things even worse for the European auto business, which was already having a hard time. Volkswagen made a suggestion last week that it might shut down one of its German plants. Continental AG, which sells BMW the bad brakes, also saw a 10% drop in its shares, the biggest one-day drop since March 2020.
BMW changed its view for 2024 in a news release on Tuesday. The business now thinks that there will be a small drop in car sales. It also changed what it thought the profit margins would be. Instead of 8% to 10%, it now believes the EBIT margin will be between 6% and 7%. Return on capital invested has also been changed from 15% to 20% to 11% to 13%.
It said, “The delivery halt of vehicles not yet with customers will affect global sales in the year’s second half.”
Over 1.5 million cars are affected by the problem with the brakes, which will cost the warranties several hundred million euros more in the third quarter.
Also, BMW said that demand was low in China, even though the Chinese government was trying to boost the market. According to the business, “Consumer sentiment remains low.”
The level of competition in key areas like China and the USA is pushing down both sales volume and prices.
The European auto business is already having a hard time, and BMW’s downgrade makes things even worse. Volkswagen has had problems because unions don’t want the company to close its German plant and end job security deals.
VW’s stock dropped 2.7%, hitting its lowest level since March 2020. The Stoxx Europe 600 Index’s Automobiles & Parts sector went down by 3.84%, which was part of the Stoxx 600 Index’s overall 0.48% drop. The market for cars has gone down by 12% so far this year, while the Pan-European Stoxx 600 Index has gone up by almost 6%.
Europe’s auto business is having a hard time with the economy because of things like rising wages, the switch to green energy, and more competition from Chinese electric cars. The EU’s new taxes on Chinese electric vehicles could make China respond with its tariffs, which could hurt European exports of petrol cars, which are a big part of Volkswagen’s business.
In China, electric cars are becoming more and more famous, but a lot of expensive cars are still coming from Germany.
Read More Update Follow The Update Times
