French carmaker Renault SA was recently criticized in an open letter by one of its Chinese dealers for its sales targets, in what has become an industry-widespread tension between local sales networks and the foreign brands.
According to the dealer, which used the website of official newspaper People’s Daily yesterday to publicize its letter, the French automaker and its local Dongfeng Renault Automotive Co joint venture set unrealistic sales targets, coercing the dealers into purchasing more vehicles then they were able to sell – deeply impacting the profits due to higher price cuts needed to offload the stock. With heavy losses, the letter claimed that 0 percent of the brand’s retail units were posting negative results much of last year. Renault quickly reacted and responded to the letter by pledging help and support to its local partners – also expressing confidence in their ability to profit from the carmaker’s expansion strategy.
With the overall Chinese economy growing at its slowest pace since 1990, the auto market also took a dive and only soared 6.9 % last year after a 14% climb reported back in 2013. The situation has triggered a widespread dealer attack against foreign carmakers over how the lower profits or losses should be divided. In an unprecedented announcement for the reclusive Chinese dealers’ association, the body announced it convinced BMW – the largest premium automaker in the world – to pledge 5.1 billion yuan (539.85 million pounds) in subsidies to its sales network. Additionally, Porsche and Toyota are known to be involved in negotiations over additional support and the modification of proposed sales targets.