- Premium European automakers are shelling out millions of Euros to keep their dealers alive in a tough Chinese car market.
- A new price war in the country has led to unsustainable heavy discounting that’s putting retailers into the red.
- BMW’s Q3 China sales slid 30 percent and its fancy Beijing Xingdebao 5S store was forced to close.
European carmakers have been making bank in China for years, but now the profit stream has turned to a trickle, and no one knows this better than the retailers struggling to shift metal. Western premium brands are now reportedly forking out “hundreds of millions” of euros to prevent their dealers from going under.
The Chinese new-car market has been ravaged by an influx of desirable products from the nation’s increasingly aggressive domestic brands and a related price war that has forced Western automakers to heavily discount their own models to stay competitive.
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But that discounting isn’t sustainable for Western brands or their dealers, some of whom would have had to close their doors for good without financial aid from the car companies they represent.
Auto News reports that BMW has spent “three-digit-million” euros to keep its dealer network in China afloat, and rival premium brands Mercedes and JLR have also sunk large sums into helping prevent their retailers from going bust.
But in some cases, even that help can’t put off the inevitable. One of BMW’s flagship stores, the Beijing Xingdebao 5S, has been forced to shut up shop, and it’s easy to see why when you consider the automaker’s sales in China have dropped by a whopping 30 percent in the third quarter of this year. BMW blamed a brake-related recall, but, like Chinese consumers, we’re not buying. Other high-end Western brands like Porsche have also watched China sales tank. JLR’s were down 17 percent in Q3.
The report quotes the China Automobile Dealers Association as saying that around 2,000 retailers are expected to close this year, with more than half of dealers suggesting to a survey team earlier this year that they would be unprofitable in 2024.