Automakers yield to dealers' demands

FAW Toyota Motor Co has been asked to pay cash rebates to their dealers following BMW and Benz's earlier decision to do so.

The China Automobile Dealers Association (CADA) had demanded that FAW Toyota, the joint venture of State-owned FAW Group Corp and Japanese carmaker Toyota Motor Corp, pay at least 4,000 yuan ($642.40) per car to its dealers, leading to a total cash rebate of 2.2 billion yuan, media reported on December 26.

CADA made the request in a letter sent to the company on December 26, and asked for feedback in five workdays, according to a copy of CADA's letter shown on news portal 163.com on December 26.

Song Tao, vice secretary-general of the dealer alliance, told the Global Times Tuesday that the company paid much attention to the issue and will come up with a decision soon.

The dealer alliance also required FAW Toyota to make the 2015 sales quota no greater than what was actually accomplished in 2014, according to the CADA letter.

These requests came after dealers complained about excess stocks and capital pressure, CADA said in the letter, noting some dealers have been struck with serious losses and may even go bankrupt.

Dealers have been faced with surplus stocks for four years because automakers usually tend to impose high sales quotas on their dealers in order to achieve impressive sales data, Zeng Zhiling, a senior analyst at Shanghai-based consultancy LMC Automotive, told the Global Times Monday.

However, due to the growing competition in the auto sales market and discounts provided to attract customers, it has become difficult for dealers to make profits from just auto sales, he noted.

Dissatisfaction among auto dealers prompted them to unite and force a change in the system.

Thirty-two BMW dealers demanded that the premium car maker pay 6 billion yuan in cash rebates in November.

BMW soon agreed to pay 5 billion yuan in cash rebates, Guangzhou-based newspaper New Express Daily reported on December 24.

Benz gave about 1 billion yuan to its dealers in sales bonuses in early December while Audi also said it would pay 2.05 billion yuan in subsidies to its dealers, news portal sina.com.cn reported Monday.

These automakers took positive actions in a bid to ease tensions with their dealers and avoid protests from them, a situation BMW had faced, the report said.

However, the cash rebate is only a temporary solution which does not fundamentally fix the problem, Zeng said.

Under current auto industry regulations, dealers have virtually no say on sales quotas and retail prices.

To build a healthy auto market, industry regulations should be reformed to break automakers' monopoly position and give appropriate rights to dealers, Zeng noted.