Continental shares fell due to the BMW car recall

Shares of Continental plummeted after it was announced that BMW would recall 1.5 million vehicles due to a faulty braking system manufactured by one of the German conglomerate's divisions.

BMW's own stock fell to a 4-year low, and the automaker reported that it had significantly reduced its annual revenue forecast, as the recall affected many more vehicles than previously anticipated. The recall is expected to cost the automaker almost €1 billion.

The defective braking system, produced by Continental, was installed in various BMW models that rolled off the assembly line from June 2022, and the recall includes, among others, the BMW X1, X2, and X5 crossovers, as well as the Mini Cooper and Rolls-Royce Spectre.

According to Continental, only a "small portion" of the braking systems it supplies to BMW will need to be partially replaced due to an electronic component with "impaired functionality". Continental estimates that the warranty coverage costs will be between €40-60 million, which is significantly less than BMW's anticipated losses.

Approximately 1.2 million vehicles from the recalled batch have already been delivered to customers and can be remotely checked for defects using software updates, while the delivery of another 320,000 vehicles will be delayed, which will reduce BMW's sales in the second half of this year.

Continental itself recently announced the recall of nearly 150,000 passenger and commercial vehicle tires.