The company reports the dashboard panel did not undergo the process of milling the "weak points or deployment points" during the production process for the passenger side.
BMW says these points are used as a break point of the dashboard panel if the airbag is triggered.
The carmaker warns that in the event of a collision, the condition could cause the front passenger airbag to deploy incorrectly, posing an increased risk of injury to the occupant in the front passenger seat.
Affected units were sold from 1 June 2016 through 30 April 2017. The VIN list for these models can be viewed here.
Owners of the recalled vehicles will be contacted by BMW Australia via mail, and are advised to visit their local dealer to arrange the inspection and repair of their X1. For more information, head to bmw.com.au or contact 1800 813 299.