German carmaker BMW plunged more than 11% on the Frankfurt Stock Exchange on Tuesday after it said it had halted deliveries of more than 1.5 million vehicles worldwide due to brake problems and cut its economic forecasts.
Shares of the DAX 40-listed company fell 11.15 percent to close the session at 68.98 euros, down from 77.64 euros the previous day.
In a statement on Tuesday, BMW said it would halt deliveries of more than 1.5 million vehicles that are not yet in customer hands due to problems with the integrated braking system supplied by a supplier.
The company estimated that these issues will result in “triple-digit” additional warranty costs in the third quarter. This, combined with falling demand in China, has prompted the group to adjust its 2024 forecast and now expects pre-tax profit to “decrease significantly,” whereas it previously expected a slight decline.
In the automotive segment, the group expects a slight decline in deliveries compared to the previous year, while previously expecting a slight increase.
EBIT margin will be 6% to 7%, compared to 8% to 10% previously; return on invested capital will be 11% to 13% (previously 15% to 20%) and free cash flow will exceed 4 billion. The motorcycle business will be affected by slower volumes and prices, with deliveries similar to last year, compared to the slight increase previously expected. In this context, the company has reduced the EBIT margin for this segment to a range of 6% to 7%, compared to the previous range of 8% to 10%, and the return on equity to 15% to 16%, compared to the previous range of 21% to 26%.