BMW Lowers Profit Forecast Amid Parts Shortages And Weak China Sales

MUNICH, Sept 11 (Bernama-dpa) -- German automaker BMW has slashed its sales and profit expectations for the year, citing issues with supplier parts and a slowdown in China.

Profits before tax are likely to fall by at least 10 per cent compared to the previous year, the company said, reported German news agency dpa.

A brake system problem, affecting over 1.5 million cars, has led to significant warranty costs and halted deliveries of 320,000 vehicles, impacting global sales in the second half of 2023.

Additionally, BMW's sales forecast for China has been downgraded as demand remains subdued despite government support measures. The company now expects its EBIT margin to fall between 6 per cent and 7 per cent, down from its earlier 8 to 10 per cent target.

According to BMW, the problems with a brake system produced by a supplier affect a total of more than 1.5 million cars and caused warranty costs of hundreds of millions of dollars in the current quarter.

BMW also suspended deliveries for 320,000 cars that have not yet been handed over to customers because of the issue, which will lead to negative sales effects worldwide in the second half of the year, the company said.

In addition, demand in China remains subdued. BMW had previously been much more optimistic about short-term prospects in the Chinese markets than the competition. 

But "despite the government's support measures, the reluctance to buy continues," the company announced on Tuesday. 

Sales forecasts were also lowered on Tuesday, with BMW's board predicting that sales will fall compared to 2023 instead of the growth anticipated earlier in the year.

The EBIT margin, or how much income from sales remain as operating profit, is now only expected to be between 6 per cent and 7 per cent in the car segment. BMW had previously targeted 8 per cent to 10 per cent margins. 

Profit before tax is also likely to be significantly lower than in the previous year. 

Last year, BMW sold 2.55 million cars, achieved an EBIT margin of 9.8 per cent in its core business and generated a pre-tax profit of €17.1 billion (US$18.9 billion).

--BERNAMA-dpa