BMW cuts 2024 outlook on Continental brake issues, shares plunge

10:26 am Tuesday, September 10th, 2024

By Paolo Laudani and Christina Amann

(Reuters) -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 and Continental were both down around 9% on the news, making them the top decliners on Germany’s benchmark DAX index and also dragging down European auto stocks.

BMW said delivery hold-ups 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.

Around 1.2 million of those vehicles have been already 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.

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

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

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

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

“Despite stimulus measures from the government, consumer sentiment remains weak,” BMW said in a statement.

(Reporting by Paolo Laudani and Christina Amann; Writing by Christoph Steitz; Editing by Rachel More, Chizu Nomiyama and Jan Harvey)