BMW AG, the iconic German automaker, has reported a dramatic decline in quarterly profits, weighed down by a massive vehicle recall and slumping sales in China. The company, which includes the Mini and Rolls-Royce brands, saw its pre-tax profits fall by nearly 80% to €838 million for the three months ending 30 September, compared to the same period last year.
Revenue also took a significant hit, dropping over 15% year-on-year, while return on sales plummeted from 10.6% to just 2.6%, reflecting a tough quarter for the company.
The poor performance can largely be attributed to a global recall of 1.5 million vehicles due to a faulty integrated braking system (IBS) supplied by Continental AG. The recall led to a drop in vehicle deliveries and higher warranty costs, which “notably impacted earnings,” according to BMW’s financial report. In total, deliveries in the automotive segment were down by 13%, with a particularly steep decline of almost 30% in the Chinese market.
“The challenging market environment in China is also having an effect. Despite the stimulus measures implemented by the Chinese government, the general economy remains affected by low consumer confidence, which is having a knock-on effect on sales volumes,” the company said in its statement.
However, BMW’s electric vehicle (EV) sales showed strong growth, providing some positive news amid the downturn. The company reported a 19.1% increase in battery electric vehicle (BEV) sales for the first nine months of 2024. The rise in EV sales is expected to continue, with BMW anticipating that lower commodity prices, particularly for battery materials and precious metals, could further boost this segment.
Despite challenges in China and potential trade tariff impacts from the upcoming US administration, BMW is finding some relief in its European markets. While no individual market showed growth in the quarter, vehicle sales in Europe declined by just 1% from July to September, and overall deliveries for the year-to-date grew by 1.4%.
Looking ahead, BMW expects further challenges in the remainder of 2024. The company predicts a continued drop in profits due to the lingering effects of the IBS recall and ongoing low consumer confidence in China. “The delivery stops related to the supplied Integrated Brake System (IBS) and a sustained drop in consumer confidence in China will continue to have an impact for the rest of the reporting year,” BMW warned.
The automaker has also indicated that deliveries are expected to remain lower in the final quarter of the year, with no significant recovery in sight for the Chinese market.
