BriefCASE: BMW hits the brakes with vehicle recall

BMW recently initiated a global recall involving over 1.5 million vehicles— including the BMW 5 Series, 7 Series, Rolls-Royce Spectre, Mini Cooper, Mini Countryman and many BMW crossovers — citing issues with the integrated braking system (IBS) supplied by Continental AG. The defect lies in the brake-by-wire (BBW) technology, an innovative system that enhances braking efficiency through electronic signals rather than traditional hydraulic mechanisms.

The defect in the IBS stems from interference in the electronic signals controlling the brakes, potentially leading to reduced braking efficiency. Although the system is designed with a backup "safe mode" to ensure legal compliance, the increased force required by drivers during such failures poses safety concerns. The root cause was traced to a Continental plant in Hungary, where insufficient cleanliness standards affected the circuit boards integral to the braking system.

The implications of this recall extend far beyond immediate financial costs, affecting BMW and Continental in various facets of their operations.

Implications for BMW and Continental

BMW said Sept. 10 that the IBS-related technical actions will result in additional warranty costs in the high three-digit millions in the third quarter. The disclosure brought a profit warning and BMW's market value dropped roughly $5.5 billion as a result.

The company also confirmed that halting the delivery of vehicles — due to the IBS-related defect — that are not already in customers' hands will have a negative worldwide sales effect in the second half. The Associated Press reported Sept. 11, citing BMW, that of the 1.53 million affected cars, 1.2 million are already in customers' hands — while about 320,000 remain with BMW or in dealer stock.

BMW told The Associated Press that the company first identified the issue during an internal quality check, prompting a safety recall in February, but since then additional cases have been identified "beyond the scope of the original recall." Prolonged recall issues may alter public perception about a brand's commitment to safety and quality assurance. BMW is expected to intensify its quality control measures and supplier management to prevent future defects. This involves increased scrutiny of production processes and supplier operations.

The recall related to brake systems in BMW vehicles is expected to have implications for Continental as well. If the core issues behind the recall are not addressed promptly it could impact the company's future contracts and collaborations. As per S&P Global Mobility data, as well as BMW, Continental supplies brake actuation systems to original equipment manufacturers such as Renault-Nissan, Ford and Stellantis. BMW is one of Continental's largest OEM partners, with significant brake actuation demand in 2024, and it is expected to maintain this strong relationship.

Brake-by-wire's future

The recall of BMW vehicles owing to BBW system defects presents short-term challenges such as potential consumer mistrust and delayed OEM adoption. However, the long-term outlook for BBW technology remains promising, driven by trends toward electrification and higher levels of vehicle autonomy (Level 3 and above). Modern braking systems extend beyond just slowing vehicles. BBW tech enables features such as automatic emergency braking, adaptive cruise control and torque vectoring, which enhance safety and performance.

According to S&P Global Mobility analysts, BMW's evolution toward BBW systems aligns with industry trends, particularly in its emphasis on electrification and autonomous driving. While electro-hydraulic brake systems will dominate until 2029, BMW is set to pivot to electro-mechanical systems, which are expected to grow rapidly from 2028, alongside increased investment in electric vehicles.

The automotive industry has faced numerous recalls, including Volvo's BBW and seatbelt defects, Toyota's unintended acceleration, Tesla's autopilot issues, GM's ignition switch failure and the widespread Takata airbag scandal. These incidents highlight the challenges of introducing advanced technologies and the importance of early defect detection, swift response and consumer transparency. With the rise of connected vehicles, automakers such as Tesla have leveraged over-the-air software updates to quickly resolve issues. Effective recall management, through robust safety protocols and proactive communication, is crucial to maintain brand trust and long-term success in an increasingly tech-driven industry.

Authored By: Porchselvan Subramanian, Senior Research Analyst, Supply Chain & Technology, S&P Global Mobility

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