BMW AG’s profit margin fell to the lowest in more than four years in the third quarter as a costly recall and weak demand in China weighed on earnings.

Penske Automotive Group Inc. reported a 14% drop in net income in Q3 due to the BMW recall and rising interest costs.

BMW reported a sharp drop in profitability for its key automotive unit, hit by costs of a recall and weak demand in China, but it forecasts stronger earnings in the fourth quarter.The German luxury-car maker said its earnings before interest and taxes margin in the automotive segment,

BMW reported an 84% drop in quarterly profits, primarily due to declining sales in China and a costly vehicle recall affecting 1.5 million cars. Overall sales decreased nearly 16%, and the company faces ongoing challenges in the competitive auto market.

BMW on Wednesday reported a 61% drop in its third-quarter profit, missing analyst expectations because of slumping China sales and brake problems and sending its shares to their lowest level in more than 2-1/2 years.

Technical problems with braking systems and weak demand in China saw third quarter profits fall 84% on the year to €476 million ($512 million) at German carmaker BMW in results published on Wednesday.