BMW says 1.5 million cars may have brake problem

German automaker BMW Group expects to spend up to $1 billion on fixing a problem with the braking systems of around 1.5 million vehicles it sold during the past two years.

The company said the vehicles have been distributed globally, with around 370,000 in China, 270,000 in the United States, 150,000 in Germany, 70,000 in South Korea, and 60,000 in France.

It detailed the size of the problem on Tuesday, triggered a sizable fall in its share price.

The company had made people aware of the issue in April, but investors seemed to have been surprised by its scale.

BMW said the potential defect has also been identified in around 320,000 vehicles that have not yet been shipped to customers, which will slow up their delivery by around a month.

The company said it has set aside a "high three-digit million amount" to pay for the work, which will be done under warranty.

The Munich-based automaker also said it has been experiencing weak demand for its products in China.

The recalls and the disappointing sales figures led it to cut its full-year earnings forecast, with earnings likely to drop significantly below last year's $18.9 billion.

BMW said its full-year operating margin will now likely be in the 6 percent to 7 percent range, instead of the previously expected 8 percent to 10 percent range.

"The one-off technical action and China market development is definitely challenging," the Financial Times newspaper quoted BMW as saying.

The company said cars produced between June 2022 and August 2024 are affected by the glitch, with models being recalled including the BMW X1, the Mini Cooper, and the Rolls-Royce Spectre.

BMW said the defect is likely to affect between 3 percent and 5 percent of vehicles produced during the time window.

The company said the fault is related to the vehicles' braking support system, although it said impacted autos will still be within the legal requirements for braking, in spite of the fault.

BMW Group said the faulty components were supplied by a third-party vendor, a German parts supplier called Continental AG.

A spokesperson for BMW said the company "has developed a diagnostic software to detect the brake fault before it occurs", with the software able to warn drivers and tell them to visit a dealership as soon as possible.

The business news agency Bloomberg said BMW's difficulties following hot on the heels of VW Group announcing layoffs and possible factory closures points to a crisis among German automakers.

It said "the one-two punch "dealt a blow to Germany's economy, which has been struggling with expensive energy prices, high inflation and interest rates, and industrial action.

BMW's shares closed 8.7 percent lower in Frankfurt on Tuesday, with the company's market valuation down by around $5.53 billion.