Crisis at BMW: Car company loses almost 84 percent of its profits

Car maker BMW suffered a slump in profits in the third quarter due to technical problems with braking systems and weakness in the important Chinese market. According to information on Wednesday, the company earned a total of 476 million euros between July and September, which was almost 84 percent less than in the same period last year. In addition to an extensive recall, the main reason for this was “buying reluctance in China”.

Overall, the car manufacturer spoke of “extraordinary burdens in the third quarter”. The profit margin before interest and taxes in the automobile division slipped by 7.5 percentage points to 2.3 percent. That was an even more significant decline than experts had already feared. BMW had already lowered its outlook in September due to the problems.

In September, the Munich-based car manufacturer recalled 1.5 million vehicles worldwide or stopped delivering them due to problems with the braking system. As a result, BMW adjusted its profit forecast for the current year and stated that profit before taxes would decline “significantly” this year.

In the wake of the recall, the company had already stated that it expected that the technical problems would lead to “negative sales effects worldwide in the second half of the year.” Additional costs “in the high three-digit millions” are expected in the third quarter.

“The profits of German car manufacturers are melting away like snow in the sun,” explained car expert Ferdinand Dudenhöffer about the results at BMW. “A 30 percent drop in vehicle sales at BMW in China shows, along with the other German car manufacturers, that BMW, Mercedes and VW have a huge problem,” he continued.

Volkswagen also recorded a massive drop in profits in the third quarter. High costs and significantly weak sales in China reduced net profit by 63.7 percent to just under 1.58 billion euros.