Dealers protest to BMW over sales quota

Industry slowdown making it harder for sellers to meet targets

A group of BMW dealers have been negotiating with the German automaker to lower their sales quota, media reported, as a cooling down in China's auto market makes it harder for dealers to meet their targets.

The dealer alliance has written a letter of complaint to BMW's China head Karsten Engel, asking for better terms in the sales contract and also demanding a cash rebate of 6 billion yuan ($972 million) as performance-based bonuses for car dealers, according to media reports.

The group demanded that it draw up the sales quota together with BMW in the future and also that the German carmaker not sell the company's unpopular models in a bundle to the dealers.

BMW did not reply to the Global Times' interview request as of press time. But a source close to the matter said on condition of anonymity that the company is still discussing ways to resolve the dealers' protest.

A column article on news portal finance.sina.com.cn said Tuesday that 32 BMW dealer groups, together accounting for some 68 percent of BMW's annual sales in China, have taken part in the protest.

The German automaker is among the best-performing premium car makers in China. It sold a total of 415,209 units in China in the first 11 months this year, up 17.2 percent year-on-year and 390,713 units in 2013, up 19.7 percent on a yearly basis.

But such sales data generally refers to shipments to dealers as opposed to retail sales to consumers, which means that sales at retail level could be lower than the official data amid the industry slowdown.

In the first 11 months, China sold a total of 21.08 million units of vehicles, up 6.1 percent year-on-year - the growth is 7.4 percentage points lower than the same period last year, according to data from China Association of Automobile Manufactures on Wednesday.

In addition to this, the government's anti-extravagance campaign has also dented sales of premium auto brands like Audi and BMW in China, experts said.

"The appeals [of BMW dealers] are reasonable," Beijing-based independent industry watcher Zhang Zhiyong told the Global Times Wednesday, adding that it is important to settle the dispute as it could harm its performance in China in the future.

Car dealers are facing thinner profit margins amid the industry slowdown, but the losses are mainly being shouldered by dealers, as carmakers generally have a stronger say in their cooperation with car dealers in China, experts said.

But automakers still tend to impose high sales quota on their dealers and are still quite enthusiastic in expanding their dealer network in a bid to beat the competition, leading to high inventories among dealers.

The China Automobile Dealers Association (CADA) said on December 3 that the vehicle inventory alert index was 65.7 percent in November, up 10.7 percentage points month-on-month and is also much higher than the 50 percent alarm level.

"Other automakers are also facing the same problem [as BMW]," Su Hui, an expert at CADA, told the Global Times on Tuesday. He noted that the previous rapid growth of China's auto industry was accompanied by a rapid expansion in the number of dealers, but now with the slowdown, some dealers may be forced to leave the industry.