China: BMW to support loss-making dealers with $820 million image

Bayerische Motoren Werke AG, the world’s largest premium automaker, has decided to levy 5.1 billion yuan ($820 million) to help its Chinese sales network recover some of the losses.

The news comes from the China Automobile Dealers Association, the country’s largest dealer group and a representative for the local distributors of BMW cars, with the automaker agreeing to pay the retailers after the latter stopped ordering cars from the company. According to Song Tao, a deputy secretary general of the China Automobile Dealers Association, which acted as the retailer’s negotiator, these are the largest subsidies levied by any manufacturer to its distributors in China and are due to be paid by the end of February. The CADA spokesperson added that the Munich-based carmaker and its Chinese dealers are still debating around this year’s sales targets.

In China, the largest auto market in the world, numerous dealers have complained about the lack of flexibility from automakers in setting up the yearly sales quota – with the distributors unable to reach the unrealistic sales goals that entitled them to year-end bonuses. The situation comes just as recent months have shown the sales pace in China has lost some steam and foreign automakers keep expanding their manufacturing capacity and number of distributors in order to secure even more market share in the country. BMW’s payout to the dealers could prove a key asset for the dealers negotiating with other automakers to gain similar support – for example some of the dealers in Toyota’s network even threatened to quit one of its Chinese ventures because of increasing losses.

Via Bloomberg