By Stephen Wilmot

BMW is leading a selloff in car stocks.

A profit warning from the Munich-based manufacturer on Tuesday sent its shares down 9% and dragged down peers such as Stellantis and Mercedes-Benz. U.S. auto stocks such as Ford and GM traded lower premarket.

BMW is facing three headaches: a faulty braking system, weak car sales in China, and tougher competition in motorcycles.

For auto investors more generally, the biggest concern is probably BMW's comments on China. "Consumer sentiment remains weak" in the world's largest car market, the company said.

BMW first recalled vehicles due to the braking problem in February. It now says more than 1.5 million vehicles are affected, resulting in additional warranty costs this quarter "in a high three-digit million amount."

According to German press reports, the system comes from industry supplier Continental, whose stock also fell roughly 9%. Suppliers typically pay compensation to automakers for problems with their parts.

BMW now expects to sell slightly fewer cars this year than last year, having previously expected modest growth, and at lower margins. It warned pretax profit would "decrease significantly", after earlier guiding for a slight drop.

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(END) Dow Jones Newswires

September 10, 2024 09:04 ET (13:04 GMT)

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