Jaguar Land Rover will use its resources to support dealers and share more profits with them. The China branch denied it plans hundreds of millions of yuan in subsidies. （Photo/China Daily）
Premium carmakers BMW and Jaguar Land Rover have pledged greater support for their Chinese dealers after recent meetings, including a range of measures, and reports said financial incentives are also possible.
BMW China released its support action plan after the national dealer investors' conference in Beijing on July 1. It has adjusted supply, optimized dealer's performance assessments, simplified operational processes, helped dealers to grow new business and expanded its line-up.
Karsten Engel, president and CEO of BMW Group Region China, said in a news release, "Based on the principle of win-win partnership, we will continue to face any market challenges together with our dealers and jointly develop a sustainable business model for the future."
The German carmaker declined to comment on Chinese media reports that billions of yuan in incentives or subsidies were planned this month for dealers' first-half achievements, tens of thousands of yuan for each unit. The China Automobile Dealers Association said in January that BMW agreed to give 5.1 billion yuan ($821 million) in subsidies to dealers by April after negotiations on higher returns and lower volume targets.
BMW sold 230,601 vehicles on the Chinese mainland in the first half of this year, an increase of 2.5 percent from the same period of 2014.
Many dealers failed to meet annual targets in 2014, amid the slowing Chinese market, and thus received only limited incentives. Subsequently the dealers jointly negotiated with the carmakers for more benefits last year.
Mercedes-Benz gave a special bonus to dealers at the end of 2014, which media reports said was around 1 billion yuan in total.
Media outlets reported earlier in 2014 that JLR dealers refused to accept more cars as they still had stocks to handle, and failed to reach agreement on their requests to increase profit and lower volume.
JLR Integrated Marketing, Sales & Service's news release on July 8 said JLR will use its resources to support the dealers and share more profits with them. The China branch denied the reported hundreds of millions of yuan in subsidies.
The IMSS has reduced sales targets, adjusted supply and adjusted pricing tactics including lowering the suggested price of the domestically produced Land Rover Range Rover Evoque.
Both BMW and JLR said they aim to optimize auto stock levels and increase the profitability of dealers, in reaction to the slowing Chinese market.
Deloitte's China Auto Consulting Practice managing partner Marco Hecker said the Chinese market still has huge potential because of having the highest growth in the world, and the largest volume.
"It is far from saturation. The Chinese auto market penetration rate is only 14 percent," he said.
"The premium auto market still has a faster growth rate than the overall market, and the international carmakers still have higher profitability than the local ones," he added. However, the consulting company's report found about only 30 percent of dealers were profitable last year, drastically lower than the 56 percent in 2012.
