BMW & MINI are bracing for a significant financial hit as it works to address a widespread braking system fault that is creating a massive 1.5 million vehicle recall. What are the affects on the business and (more importantly) what vehicles are affected? Let’s get into the details.

The braking system problem, which affects a handful of BMW and MINI models, stems from a faulty Integrated Braking System (IBS) component supplied by Continental. This system is designed to control the brake pedal’s feel and feedback, and its failure could lead to the loss of power braking assistance, raising the risk of drivers losing control of their vehicles. While BMW maintains that the affected cars remain safe to drive, it has not taken the situation lightly.

MINIs Affected by the Recall

The company first initiated a recall earlier this year when the issue was discovered in more than 80,000 models. The scope of the recall has since expanded, leading to a halt in deliveries of the F65, F66 MINI Cooper and U25 Countryman. For those that have already been delivered, MINI is confirming that the issue doesn’t mean the brakes won’t work. They’ll simple require more pressure to operate.

BMW confirmed that over 1.5 million vehicles are affected worldwide from Cooper to BMW 7 Series. But the issue is particular tough for MINI dealers who have been patiently waiting for the new generation to land on lots this summer only to have this stop sale happen shortly after.

While the fix is coming, it can’t come soon enough for dealers who were already starved for inventory until very recently.

BMW Stock Down 8% on the news

The automaker now expects a “slight decrease” in overall deliveries across its brands compared to last year’s total of 2,555,341 vehicles, having previously forecast a marginal increase. The company also anticipates warranty costs from the recall will reach the “high three-digit million” range. These factors have prompted BMW to lower its profit margin forecast for the year to 6-7%, down from the previous estimate of 8-10%.

The market responded swiftly to the news, with BMW shares falling by 8%, while Continental, the supplier of the faulty braking system, saw its stock drop by 9% on September 10.

In a statement, BMW reiterated that the braking issue, while serious, does not prevent the vehicles from being driven. “In very rare cases, some vehicles could suffer from signal interference in the electronics of the brake system, which means more pressure than normal is needed on the brake pedal to slow the car down. It’s important to stress that even if this issue occurs, braking is always possible,” the company said.

BMW also pointed to weakened demand in China, its largest market, and a “challenging competitive environment” as additional factors weighing on its outlook. The company expects the third quarter to be the most heavily impacted and will release full financial results on November 6.