BMW to pay $820m in subsidies to China dealers amid slowdown
BMW to pay $820m in subsidies to China dealers amid slowdown.Reuters

Automaker BMW will pay 5.1bn yuan ($820m) to its distributors in China to help compensate their losses after retailers stopped ordering cars from the German manufacturer, reports said.

BMW hopes the move will ward off a potential dealer revolt in China, the world's largest car market, which has been hit by a faster-than-anticipated economic slowdown.

BMW's stock was trading 1.55% lower at 1208 CET in Frankfurt.

The subsidies are the largest by an automaker to its retailers in China and will be paid by the end of February 2015, according to Song Tao, a deputy secretary general of the China Automobile Dealers Association (Cada) that represented BMW distributors during negotiations.

Dealers are still in talks with the Munich-based carmaker over its 2015 sales target, Song added, which dealers claim are too high given the slowdown.

BMW, in a statement, said that it had "reached consensus on... optimised business measures and financial allocation for the dealers", but refused to comment on the rebate figure.

"BMW and its dealer partners are fully aware that the overall automotive market in China is normalising with growth ... [at a] lower but stable pace."

Automakers, such as South Korea's Hyundai, are increasing the number of China factories even as more cities restrict the sale of vehicles to battle congestion and persistent air pollution.

On 29 December, 2014, the southern Chinese city of Shenzhen announced quotas on new vehicles. Tianjin, Beijing, Shanghai, Guangzhou, Guiyang and Shijiazhuang have all imposed restrictions on new vehicles sales in the past.

Unsold vehicle stock at dealer lots rose to a record level in November 2014 since August 2013, according to Cada data.

China's 2014 growth remains on track to miss the regime's 7.5% target and mark the weakest expansion in 24 years.