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BMW to pay £536 million to keep China dealers happyBack

BMW has reportedly agreed to pay £536 million (5.1 billion yuan) to help offset the losses of its dealers in China after retailers stopped ordering cars following a disagreement over targets.

The subsidies will be paid by the end of February, China Automobile Dealers Association (CADA) deputy secretary general Song Tao told Bloomberg.

He said China’s BMW dealers are still in negotiations with the German carmaker over their 2015 sales targets.

BMWLogoIt comes after franchised dealers in China complained of having to meet unrealistic sales projections in order to qualift for year-end bonuses.

On December 26 CADA wrote to FAW Toyota, the joint venture of state-owned FAW Group and Japanese carmaker Toyota, requesting it to pay at least 4,000 yuan per car to its dealers, and demanded that the network’s 2015 sales quote be no higher than that actually achieved in 2014.

CADA said 95% of the brand’s 523-strong network is losing money.

The negotiations for financial support are part of a broader push by China’s auto retailers to gain more autonomy from manufacturers, which currently dictate the number and type of cars they sell.

The China Auto Dealers Chamber of Commerce, a separate distributor group, last month proposed to the government that automakers be prohibited from dictating the number of cars they sell and extend the duration of distribution contracts to stem losses in the industry.

The governments of four major cities in China – Shanghai, Beijing, Guangzhou and Shenzhen – have applied limits to the number of new cars to be registered annually in response to problems with congestion and pollution.

Source: AM-Online

Posted by Sue Robinson on 09/01/2015