BMW recalls 1.5m cars over braking fault, shares hit four-year low

BMW has announced a recall of 1.5 million vehicles due to a widespread braking system fault, which is expected to cost the company nearly €1 billion. The issue, related to the electronic braking support system, affects various models produced since June 2022, including the BMW X1, X2, X5, Mini Cooper, and Rolls-Royce Spectre. Although the company claims that the brakes continue to function and no incidents have been reported, the fault may require drivers to apply more pressure to the brake pedal. Approximately 1.2 million of the affected vehicles have already been delivered, and BMW can remotely check for faults via software updates. However, around 320,000 new cars will experience delivery delays, impacting sales in the latter half of the year. The recall comes at a challenging time for BMW, as weak demand from China is also anticipated to lower profit margins significantly. The financial implications of the recall are substantial, with BMW's annual earnings projected to be considerably lower than previously expected. The company has indicated that warranty costs related to the braking issue will amount to a “high three-digit million amount.” In contrast, Continental, the supplier of the braking system, estimates its financial provision for the warranty will be much lower, in the mid-double-digit million range. This situation adds to the difficulties faced by Germany's automotive industry, which is already under pressure following Volkswagen's consideration of factory closures. BMW's share price has dropped approximately 11%, reaching a four-year low, reflecting investor concerns over the recall and its broader implications for the company and the industry.