Shares of BMW AG (DE:BMW) fell sharply yesterday after faulty brake issues prompted the company to recall vehicles and consequently, reduce its profit margin forecast for 2024. The company now expects its EBIT (earnings before interest and tax) margin to range between 6% and 7%, down from the earlier forecast of 8% to 10%. The company also expects a slight decrease in its total deliveries for 2024.
Following the update, BMW shares plunged over 11%, marking their steepest single-day drop in four and a half years. Meanwhile, shares of the braking system’s supplier, Continental AG (CONG.DE), fell 10.5% on Tuesday.
BMW is a car manufacturer known globally for its high-end brands like BMW, MINI, Rolls-Royce, and BMW Motorrad.
BMW Faces Headwinds
According to its update, BMW stated that its Automotive segment will face headwinds due to issues with the IBS (integrated braking system) supplied by Continental AG. It further said this technical issue could impact around 1.5 million cars. Consequently, the company mentioned that it will incur a “high three-digit million amount” as additional warranty costs in the third quarter. Moreover, the halt in deliveries of vehicles not yet in customers’ hands will negatively affect global sales in the second half of the year.
Along with this, BMW emphasized the difficult market conditions in China, which could further affect its sales. The company mentioned continued weak demand in this region, despite the government’s efforts to boost the market.
Earlier in August, BMW with its joint venture in China, recalled 1.36 million cars due to potential risks related to Takata airbags.
Is BMW a Good Stock to Buy Now?
According to TipRanks, BMW stock has a Hold rating with a total of 18 recommendations, of which six are Buy. It also includes nine Hold and three Sell recommendations. The BMW share price forecast is €98.11, which represents a 42.3% change from the current price level.
