Its main profitability indicator BMW in the third quarter of 2024, it fell to its lowest level in four years, Bloomberg reports.

The luxury car brand is dealing with the fallout from a costly recall of 1.5 million cars under its brands to fix a faulty brake system and weak demand for its models in China.

The German carmaker’s margin before interest and taxes fell to 2.3%. This is well below the 2024 target of at least 6% and the lowest since the second quarter of 2020, when the coronavirus pandemic hit trade at unprecedented levels.

BMW revised its financial outlook for the year in September after a faulty braking system, supplied by Continental AG, forced it to recall 1.5 million vehicles under its brands worldwide. The company has decided to allocate almost 1 billion euros to fix the faulty braking system and deal with the consequences of the temporary delay in deliveries of hundreds of thousands of higher-priced vehicles.

The problems added to an already difficult period, as faltering demand in China and Europe hit sales and squeezed margins further.

BMW shares fell as much as 6.7% in Frankfurt, also weighed down by the election of US president Donald Trump, who has said he will raise tariffs on imported cars.

BMW shares are down more than 30% this year compared to last year.

In China, BMW’s biggest market, sales plunged 30 percent in the three months to September as consumers cut back on luxury goods and local automakers offered less expensive alternatives. BMW and Mercedes-Benz have been left behind by BYD Co., which has brought a range of fully electric and hybrid vehicles to market.

BMW expects demand to remain low in the largest auto market in the current quarter as well, BMW Chief Financial Officer Walter Mertl said. He added that recalling cars to fix a faulty braking system accounted for more than half of the company’s total loss, including a drop in sales last quarter in China.

Net profit fell 84% in the third quarter compared to the same period last year to €476 million and was down 36% in the first nine months of the year.