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BMW Settles Chinese Dealer Conflict with $820 Million

Last year, we were reporting that Chinese dealers are complaining about the high sales targets BMW set for them, in their attempt to break their own record beforehand. Back then they were actually threatening the company with breaking the contracts that were no longer profitable.
bmw 1 photo
Photo: bmw
According to an insider talking to the Financial Times, the German giant agreed to a deal worth $820 million in backpayments for sales done in 2014. This way, the company managed to settle some of the disputes it had with the Chinese dealers earlier on.

However, that’s just half the problem solved. 2015 is here and the sales estimated for this year might be even more pretentious. The problem is, China’s car market is finally starting to slow down, as it is normal.

Therefore, sales increases on yearly basis in the two digit territory could be harder to reach than ever. Dealers are already talking about the insane targets that could be set not only by BMW but also by Mercedes-Benz and Audi. The thing is, the companies are acknowledging the slower pace.

In a recent statement about these problems, BMW said that it had “reached consensus on . . . optimised business measures and financial allocation for the dealers” and that “it’s aware that the overall automotive market in China is normalising with growth . . . [at a] lower but stable pace.”

Is it too much?

The $820 million (€687 million) sum is a big hit to be taken by any company, not just BMW. Analysts are claiming that this adds up to around €1,500 ($1,800) rebate per car sold in China in 2014.

However, unlike on other markets, the prices BMW has been practicing in the communist country are extremely high by comparison with other key markets. Last year, the company and its dealers were targeted by the Chinese government for possible attempts to monopolize the market. The Munich-based manufacturer wasn’t the only one under scrutiny, others being investigated as well.
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