Bayerische Motoren Werke AGs Chinese dealerships challenged the German car manufacturers sales target and said it was too optimistic, citing sluggish growth in the worlds biggest vehicle market.
Dealers located in China are asking for a bigger cash rebate from BMW, while also claiming that the carmaker has set up a too high sales target, given the current period of slowing growth. As of now BMW grants 5% to 6% rebate on every new car that gets sold, according to a senior executive at one of BMWs dealerships.
An increase in cash rebates is much needed for the Chinese car dealers as they try to make up for losses from selling new vehicles, dealership executives say. BMW has already poured billions of dollars in China, as it attempts to overtake competitor Audi as number one car manufacturer in the country, which is widely expected to turn into the worlds biggest luxury vehicle market.
Passenger-car sales increased by 9.8% during the January-October period in China, down from the 15% gain a year earlier, dealers say that the situation may be worse than it seems as the results represents deliveries to dealers, not customer purchases.
“Many dealers are buying many more cars than consumers want,” said Li Jinyong, president of Pangda Automobile Trade. “Sales at the retail level are weaker than what car makers report.”
According to Chinas recent Auto Market Almanac, the country surpassed the US in car dealers number, after increasing 30% to 2013s 22 518 vehicle merchants. However China Automobile Dealers Association said that 70% of all sellers are unprofitable, versus only 30% back in 2010.
“BMW is still aiming for more than 10% growth in 2015. But I think it’s too aggressive. I hope BMW could set a smaller sales target for me this year,” said an official from another major dealership.
A spokeswoman for the company explained that BMW is trying to achieve sustainable growth In China “Some dealers are facing challenges,” she said. “We are in close discussion with our dealer partners to find out the proper agreement in the timely manner.”
BMW lost 0.46% on Tuesday and closed at €91.81 in Frankfurt. On Wednesday the stock dropped 0.66% to trade at €91.20 at 15:41 GMT, marking a one-year increase of 9.14%. The company is valued at €58.94 billion. According to the Financial Times, the 29 analysts offering 12-month price targets for BMW have a median target of €99.40, with a high estimate of €120.00 and a low estimate of €70.00. The median estimate represents a 8.27% increase from the last close price of €91.81.
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