BMW’s net profit fell 84% due to falling sales in China and car recalls

BMW said on Wednesday it faced “extraordinary challenges” as quarterly profit slumped due to falling sales and vehicle recalls in China, the latest sign of a crisis in Europe’s auto industry.

The German luxury carmaker’s net profit fell 84% from July to September to 476 million euros ($512 million), even worse than analysts expected.

sales drop

Vehicle deliveries for the manufacturer, which also makes the Rolls-Royce and Mini brands, were down 13% from a year ago, and were down about 30% in the key Chinese market.

Overall sales fell nearly 16% to 32.4 billion euros.

The organization said it faced “extraordinary challenges” in the third quarter, particularly “weak demand in China” and braking system problems that resulted in the costly recall of 1.5 million vehicles.

Like other German automakers, the Munich-based manufacturer already relies heavily on China, where about a third of its sales are made.

But BMW has been hit hard as the world’s second-largest economy faces long-term economic problems and as new local rivals challenge traditional European automakers, particularly in sales of electric vehicles.

Despite the poor results, BMW CEO Oliver Zipzer tried to project optimism.

“Despite high planned upfront expenses, we will be back on track to deliver stronger earnings in the fourth quarter to meet our annual targets,” he said.

Impact of the recall

The braking system that prompted the recall is supplied by Continental, which said that even if the problem is discovered, the performance of the brakes will not be affected.

The recall had an impact of hundreds of millions of euros on third-quarter results.

The group had already downgraded its outlook when it announced the recall in September. Car deliveries are expected to fall slightly this year, as will profit margins.

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