Is BMW’s Party Over in China? For the Moment, it May Be.

The BMW M6 on display at the 2015 Shanghai Auto Show. (Weibo/BMW) Amid the backdrop of the 2015 Shanghai Auto Show, BMW announced upcoming plans that indicate that its long winning streak in the China market may be screeching to a halt, with the German automaker hit by the ongoing anti-corruption crackdown. According to BMWBlog, BMW plans to reduce prices and cut production, with the automaker also setting more “realistic” sales targets: BMW has scaled back manufacturing in the country to lower supply for its distributors and will also cut output in the second quarter, according to Karsten Engel, BMW’s China chief. “We’re adapting to the situation to make sure dealers are not overstocked,” Engel said. “It’s a little bit of a trend downwards,” he said. “This is the new normal and we have to accept this and we have to adapt to this.” BMW is not alone in these moves, with Ford and Volkswagen also cutting prices in recent weeks to shore up sales in an increasingly tough China market, but it is rare territory for the powerful German marque, which in recent years looked invincible in China. Like other luxury brands, BMW has been hit hard by association with the former drivers (no pun intended) of the luxury market within mainland China—corrupt officials—and has taken great pains to promote its SUV and compact car lines (two segments that are more family-friendly and aimed at self-drivers, rather than those chauffeured around town). However, unlike luxury brands such as Gucci or Hermès, BMW has not benefited from China’s growing outbound luxury spending boom. Like China’s real estate market, it seems that the country’s luxury auto market must adjust to a more modest future.

Sectors

Insights

Company

Is BMW’s Party Over in China? For the Moment, it May Be.