In a recent development, German automaker BMW AG (OTC: BMWYY) has adjusted its financial guidance for 2024 due to a slump in global sales.
What Happened: As per a press release from BMW on Tuesday, the company's Board of Management has revised the 2024 financial year guidance. The decision was influenced by several factors, including delivery stops and technical issues related to the Integrated Braking System (IBS) supplied by a vendor. These problems are expected to negatively affect sales in the latter half of the year.
The IBS-related technical issues impact over 1.5 million vehicles, leading to additional warranty costs in the third quarter. Moreover, despite government stimulus measures, the company is facing subdued demand in China.
Consequently, BMW now expects a slight decrease in deliveries compared to the previous year, an EBIT margin between 6% and 7%, and a Return on Capital Employed (RoCE) between 11% and 13% for 2024. The Free-Cash-Flow in the Automotive Segment is anticipated to be above €4 billion ($4.41 billion) for the financial year.
The revised earnings and additional inventory are expected to impact the third quarter more than the fourth. The full quarterly results and the adjusted outlook report will be published on Nov. 6, 2024.
Why It Matters: The revision in BMW's financial outlook comes on the heels of a series of events that have impacted the company's performance. In September, BMW had to recall over 140,000 Mini Cooper SE electric vehicles globally due to battery overheating problems.
This followed a significant achievement in August, when BMW outpaced Tesla (NASDAQ: TSLA) with more BEV registrations in Europe for the first time. The recent technical issues and the recall have, however, dampened the company's momentum, leading to the revised financial outlook.