Shares in BMW tumbled as the carmaker revealed it will have to recall 1.5m vehicles over a braking problem, costing it almost €1bn (£0.84bn).
The German manufacturer said its annual earnings would be considerably lower than expected, with the fault in the braking system now discovered to be far more widespread than first thought.
Although BMW said the problem with the braking system in some new models was not a safety issue, the additional cost under warranties would be a “high three-digit million amount”.
The carmaker said weak demand from China would also affect its profits, with margins expected to be about 6% rather than 10%. BMW’s share price fell by about 11% to a four-year low on Tuesday.
The update is the latest blow to Germany’s car industry, which is reeling from Volkwagen’s announcement that it may have to close factories. The closure of factories in Germany would be a first for the carmaker.
While BMW stressed that the brakes in the cars covered by the recall continue to work, and it does not know of any incident caused by the issue, it is understood that the fault in the electronic braking support system could affect how hard drivers have to press the brake pedal to stop the car.
The system, made by Continental, is used in a variety of BMW models that have come off the production lines since June 2022, including the BMW X1, X2 and X5 SUVs, the Mini Cooper and Countryman, and the luxury Rolls-Royce Spectre. It is understood only a small fraction of the cars potentially have the system malfunction. These would have been manufactured in BMW’s plants in Germany, the UK and France, as well as in the US, China, and South Korea.
Continental said that only a “small proportion” of the braking systems it produces for BMW would be partly replaced due to an electronic component that, it said, “might have an impaired functionality”.
Continental’s estimate of the financial provision it needed to cover the warranty was a fraction of BMW’s, in the “mid-double-digit million” range. Shares in the German firm, also known for its tyres, fell about 9%.
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BMW said that about 1.2m of the affected vehicles had already been delivered to clients and could be remotely checked for faults through wireless software updates. However, about 320,000 new cars would have their delivery delayed, cutting sales for the second half of the year.
When the problem first emerged in February, about 14,000 UK-registered vehicles were believed to be affected. Almost 160,000 new BMWs and Minis were sold in the UK last year.