By Nick Carey and Christoph Steitz

LONDON/FRANKFURT (Reuters) -BMW on Wednesday reported a 61% drop in its third-quarter profit, missing analyst expectations because of slumping China sales and brake problems and sending its shares to their lowest level in more than 2-1/2 years.

Shares in the premium carmaker and its German rivals Volkswagen, Mercedes-Benz and Porsche were all down 3%-5%, with traders citing a potential U.S. presidential election victory by Donald Trump, who has threatened broad tariffs on imports.

Juergen Molnar, investment strategist at brokerage RoboMarkets, said that while BMW mostly blamed a weak Chinese business for its quarterly profit drop “the punitive tariffs threatened by Trump are likely to become a further negative factor on the already long list of car manufacturers”.

BMW CEO Oliver Zipse sought to allay such concerns, saying the U.S. market would remain key regardless of which administration was in charge and that potential U.S. tariffs could simply cause BMW to sell more cars locally.

“We shouldn’t be too nervous about what might happen,” Zipse told journalists, pointing to BMW’s “very, very large footprint” in the United States but also highlighting the ongoing weakness in China.

BMW operates the group’s largest factory in Spartanburg, South Carolina, and Zipse said the company’s nationwide set-up also included 30 locations in 12 U.S. states.

BMW lowered its guidance for the year back in September citing sluggish Chinese demand and problems with a braking system supplied by Continental.

In October, the German automaker reported that its third-quarter sales in China had fallen by a third.

Rival German automakers Volkswagen and Mercedes-Benz are also struggling with falling sales in China caused by a weak economy and intense competition.

BMW said in September the brake issue affected over 1.5 million cars, with delivery delays expected for around 320,000 vehicles.

The company said on Wednesday it will hand those delayed vehicles to customers in the fourth quarter.

BMW reported an operating profit of 1.7 billion euros ($1.82 billion) for the third quarter, down from the 4.352 billion euros in the same quarter last year and below analysts’ 1.8 billion euro forecast.

The automaker’s revenue fell 15.7% to 32.4 billion euros from a year earlier, below analyst expectations of 34.3 billion euros.

The company said it was still on track for a 2024 operating profit margin of between 6% and 7%. In the third quarter, BMW’s operating profit margin for its automotive segment came in at just 2.3%.

BMW chief financial officer Walter Mertl said in a statement that “with stringent management” BMW Group “remains on track” to hit its 2024 auto free cash flow target.

“In the fourth quarter, sequentially higher deliveries and a stronger product mix will support our earnings.”

($1 = 0.9179 euros)

(Reporting by Nick Carey and Christoph Steitz; Additional reporting by Chiara Holzhaeuser and Daniela Pegna; Editing by Rachel More, Shri Navaratnam, Louise Heavens and Tomasz Janowski)

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