European automakers spend millions to retain Chinese dealers

European carmakers have been making money in China for years, but now the profit stream has reduced to a trickle, and no one knows this better than the retailers struggling to move the metal. Western premium brands are now reportedly spending “hundreds of millions” of euros to prevent dealers from going bankrupt.

China’s new-car market has been hammered by an influx of aspirational products from China’s increasingly aggressive domestic brands and an associated price war that has forced Western automakers to heavily discount their models to stay competitive.

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But such discounts are unsustainable for Western brands or their dealers, and without financial assistance from the car companies they represent, some of them will have to close their doors for good.

automotive news BMW has reportedly spent “triple digits” of euros to keep its dealer network in China afloat, while rival premium brands Mercedes and Jaguar Land Rover have also invested heavily to help prevent their retailers from going bankrupt.

But in some cases, even this help cannot delay the inevitable. One of BMW’s flagship stores, the Xingdebao 5S store in Beijing, was forced to close its doors, and considering the automaker’s sales in China plummeted 30% in the third quarter of this year, it’s not hard to understand why. BMW blames a brake-related recall, but like Chinese consumers, we’re not buying it. Other high-end Western brands such as Porsche have also seen sales decline in China. Jaguar Land Rover’s shares fell 17% in the third quarter.

The report quoted the China Automobile Dealers Association as saying that about 2,000 retailers are expected to go bankrupt this year, with more than half of them telling an investigation team earlier this year that they would not be profitable in 2024.