Volkswagen in China has reportedly agreed to set ‘sensible’ sales targets for its Chinese dealers who are suffering a drop in profitability in China’s slowing vehicle market.
The move, reported by Reuters, follows similar moves by other foreign makers who have been on the end of complaints from Chinese dealers that aggressive sales targets have resulted in over-supply and lower profits for retailers.
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Volkswagen reportedly said it would continue to pursue a “mutually beneficial and sustainable partnership” with Chinese dealers based on an agreement the carmaker has reached with distributors.
Growth of China’s vehicle market halved to 6.9% in 2014 and analysts say that car demand could slow further in 2015 in line with a weakening Chinese economy.
China’s car dealers are warning of excess supply in the slowing Chinese market and conditions that are forcing excessive discounting. Last month, the Chinese Automobile Dealers Association (CADA) warned OEMs that supply exceeds demand in China, with excessive discounting the result.
In a report to the Chinese government CADA said that automakers have wielded excessive power and pushed cars onto dealers who are now struggling to make money.
Last month BMW agreed to pay a lump sum to its Chinese dealers in order to share the costs of overstocked showrooms.
