BMW fell more than 7% after surprising the market with a cut in forecasts due to brake failures. The entire European auto sector collapsed. Volkswagen, Mercedes and Porsche fell 4%. But Renault also suffered significant losses. Investors feared that the technical problems encountered by BMW could spread to the entire sector.
BMW was the poster child for how to adapt to new times for the automobile. Its plans to transition to electric vehicles were going smoothly and it seemed immune to the slowdown in demand. Until now. BMW shares fall 8% after announcing a cut in its forecast for this year due to the impact that some defective components will have on the braking system of their vehicles. The company reported that this affected 1.5 million units. The declines are the deepest since March 2022.
The German manufacturer said that the new outlook envisages a slight decline in sales for 2024 and reduces its EBIT margin to 6%. The previous range was between 8% and 10% and there is an increase in turnover for this year, something that almost no European manufacturer had previously expected.
The news took the entire sector by surprise with a mini dieselgate effect. All the manufacturers were eventually dragged down. The Germans are the most affectionate: Mercedes down 5%, Volkswagen5% and Porsche4%. Stellantis And Renault They are not immune to losses either.
The problem comes from the supplier
The problems of the Munich manufacturer affect 1.5 million vehicleswhich are not yet commercially available. But the company acknowledged in a statement that “they will have a negative impact on sales in the second half of the year” and that “the technical solutions will result in additional warranty costs in the triple digits of millions in the third quarter.”
The technical failure has spread across the market like an oil slick and affects the integrated braking system (IBS) “provided by a supplier”. These are Continental mechanisms that work for most manufacturers. The news is a blow to a sector already bruised, due to the challenge that the electric car represents for European firms and the landing of Chinese brands on the Old Continent.
Last week, Volkswagen issued an SOS that could be extended to the entire industry. The world’s largest carmaker said it was considering job cuts and plant closures in Germany, something it had not considered since World War II. Almost 90 years without traumatic measures on its own territory.
The adjustment that occurs Volkswagen seeks to cut costs and relocate production to more profitable regionsAll European manufacturers are facing the challenge of competing with Chinese electric car makers as demand for such vehicles slows and costs continue to rise due to inflation and the war in Ukraine.
