In the papers and on a previous topic it was said that BMW are to limit discounts on their range of cars.
BMW make rules for their dealers- Type of Premises, Workshop setup etc
I would have thought that fixing prices would be beyond the limits that BMW can insist on. According to a newspaper article the limit of discounts will be 10% - this is to stop Brokers getting a BIG Margin and eroding the "forecourt price" and future Resale Prices with higher depreciation.
The article in the paper said that BMW can set max discounts as part of their T&Cs.
I would have thought Competition Rules of the EU would put a stop to Fixing Minimum Resale Prices!
How can BMW GB set Forecourt Prices?
I used to work for a large manufacturer of electronics - if the authorities even smelled "maximum discounts on sale" then we would have been in court in no time.
Why is the motor industry different? or Is it?
Edited by Dynamic Dave on 04/12/2007 at 19:15
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BMW could set up their own sales outlets, like M-B and Renault, and eliminate independents altogether - faced with losing their valuable franchise I imagine independents would jump through hoops.
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This gives me deja vu - there was a thread about this recently. I'm sure a quick search will bring it up.
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www.honestjohn.co.uk/forum/post/index.htm?t=57740
But to be fair to Falkirk Bairn, he did say right at the start of his post "In the papers and on a previous topic it was said that BMW...."
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To be honest I can't realy see how this is a major problem in the first place. What I mean is, I am not in the motor trade, but am in an industry that to some degree has 'resellers' selling our products. If a product has a list price of £100 and the dealer buy price is list minus 10%, the most discount they can give is 10%, unless they become a registered charity ! What I know of the motor trade is that rather than givign big margins on cars, dealers are given quotas of numbers of cars, where they can get a rebate if they meet their targets. Nverethe less I would have thought it unlikely that the dealers would sell at a loss just to try and meet a quota ??
I would also have thought that in the case of BMW/Audi/MB the max marfgin for the dealer would have been about 10% anyway.
I think this is just a newspaper article to fill some column inches myself.
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>>dealers are given quotas of numbers of cars, where they can get a rebate if they meet their targets. Nverethe less I would have thought it unlikely that the dealers would sell at a loss just to try and meet a quota ??
I have a client who does exactly that - loses about £200 per vehicle - based upon purchase price. However he still makes a well into six figure yearly profit.
Another sold a car well below market value, effectively giving the car away to hit the sales quota, 'sadly not to me :-(
The extra 'bonus' was worth about 20 times the loss on the car sold.
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On many brands there is little 'front side' margin - say 5% - the margin is mostly 'back side' - based on numbers sold etc. So it can pay a dealer to shift some cars at an apparent loss to make a overall profit. VW dealers were recently running a campaign in which they were selling cars for £1 (or some minimal amount) over 'what VW were selling the car to dealer at' - so the dealer could show the customer the VW invoice, apparently little profit in the dealer, but of course all the profit comes later...
Coupled with this, the manufacturers sell to the dealer at different prices depending on the type of customer the car is destined to go to. A car destined for daily rental will be priced lower than one sold as part of a 'business user' allocation, which in turn will be priced lower than one for 'retail'. Its often these 'fleet' or 'daily rental' priced cars which turn up in the hands of brokers - who can then undercut dealers trying to hold the retail price. Then there is whole matter of 'pre-reg'ing' cars and V5c retention etc etc. Its a complicated business, made moreso by the fact of 'Block Exemption' which allows cars to be sold in what is effectively a 'closed market' and hence manufacturers can to some exent apply 'price controls' on their dealers.
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Mega QuoteSNIPThe extra 'bonus' was worth about 20 times the loss on the car sold.
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I stand corrected then !
Edited by Dynamic Dave on 05/12/2007 at 18:35
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Does anyone else think that this 'noise' of limiting discounts in the future could be a last ditch attempt by BMW to increase sales in the current year...or am I being too cynical about the motor trade ;-)
Peter
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Does anyone else think that this 'noise' of limiting discounts in the future could be a last ditch attempt by BMW to increase sales in the current year...or am I being too cynical about the motor trade ;-) Peter
No, I think they would like to do it. They have been too ambitious with their sales targets for the UK and this has led dealers to try to offload cars in all sorts of ways. They cannot hold prices at the current volumes, especially if the economy goes into a downturn. If they want to hold prices they will have to reduce supply next year otherwise they will be fighting the market (and their dealers!).
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