BMW cuts profit guidance on weak China conditions, recall costs

Shares in BMW tanked to their lowest in nearly two years on Tuesday after the German automaker scaled back its full-year guidance on the back of weak market conditions in China and costs related to a product recall.

BMW said group earnings before tax will "decrease significantly" this year, compared with previous guidance of a "slight decrease", with EBIT margins in the automotive segment expected to be between 6-7%, down from an earlier 8-10% target.

The group recorded a EBIT profit of €18.5bn in 2023, with automotive EBIT margins coming in at 9.8%.

BMW said additional headwinds have hit its automotive division as a result of "delivery stops and technical actions" linked to the Integrated Braking System (IBS) that was provided by a supplier. The IBS-related technical actions prompted the recall of 1.5m vehicles and additional warranty costs will amount to a "three-digit million amount" in the third quarter.

The delays will have a negative effect on sales in the second half of the year, with the company now guiding to a fall in annual car deliveries, disappointing investors who had been told of a slight increase on last year.

"In parallel to this effect, the ongoing muted demand in China is affecting sales volumes. Despite stimulus measures from the government, consumer sentiment remains weak," the company said in a statement.

Meanwhile, BMW also scaled back margin forecasts for the motorcycles division, citing an "ongoing competitive situation" across core markets including China and the US is having a major impact on volume and pricing.

Shares in Bayerische Motoren Werke were down 9% at €70.70 by 1441 in Frankfurt, hitting their lowest level since October 2022.