German automaker BMW slashes profit forecast amid parts problems

German car manufacturer BMW lowered its sales and profit expectations for the current year on Tuesday, citing supplier parts issues and weak sales in China.

Profits before tax are likely to fall by at least 10% compared to the previous year, the company said.

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% and 7% in the car segment. BMW had previously targeted 8% to 10% 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% in its core business and generated a pre-tax profit of €17.1 billion ($18.9 billion).