BMW’s net profit drops 84% amid China sales slump and vehicle recall issues

BMW said Wednesday it faced "extraordinary challenges" as its quarterly profits plunged due to slumping Chinese sales and a vehicle recall, the latest sign of the crisis gripping Europe's auto sector.

The German luxury carmaker's net profit dropped 84 percent from July to September, and came in at 476 million euros ($512 million) — even worse than analysts had been expecting.

Sales Down

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

Sales overall fell nearly 16 percent to 32.4 billion euros.

The group said there were "extraordinary challenges" in the third quarter, in particular "weak demand in China" as well as problems with a braking system that led to a costly recall of 1.5 million vehicles.

Like other German automakers, the Munich-headquartered manufacturer had come to rely heavily on China, and makes around a third of its sales there.

But with the world's second-biggest economy facing prolonged economic problems and new homegrown rivals challenging traditional European car makers, particularly for sales of electric vehicles, BMW has been hard hit.

BMW CEO Oliver Zipse tried to sound upbeat despite the poor results.

"In the fourth quarter, we are back on track for stronger earnings in order to achieve our annual targets, despite planned high upfront expenditures," he said.

Impact of Recall

The braking system that led to the recall was supplied by Continental, which has said that even in cases where problems are detected, the brakes' performance is not compromised.

The recall impacted the third quarter results by hundreds of millions of euros.

The group had already downgraded its outlook in September when it announced the recall. It expects a slight decrease in vehicle deliveries for the year, as well as lower profit margins.

Disclaimer: This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.