German Dealers: "BMW Eroding Our Profits"

FRANKFURT, July 23 Reuters reported that German BMW dealers said on Tuesday the luxury carmaker had used the introduction of its new flagship 7-series limousine to adopt an aggressive new pricing strategy, cutting the margin that they stand to make.

In a rare sign that BMW may feel under pressure to maximise its profits, a group representing nearly all 800 German BMW dealers said 14 dealerships had lodged a complaint at a court in Munich, accusing BMW of unfairly increasing factory gate prices.

BMW, one of the world's most profitable car companies, has so far managed to ride out a global downturn in the automotive industry, which has badly hit mass-market carmakers.

The ZDK union of German auto traders said the difference between BMW's factory price for a 7-series vehicle and its list price, which is a dealer's potential gross margin, had been reduced to 11 percent from 13 percent.

The ZDK said it was hoping the court would reverse BMW's decision to raise its factory gate price because it considered this to be a breach of the contract the dealers have with BMW, which sets standards that car traders must meet to sell BMWs.

"It is getting more expensive for the dealers to buy the cars and the dealers make less from the cars without their (contractual) duties being reduced," said a ZDK spokesman.

The 7-series limousine sells for upwards of 50,000 euros ($49,650) and has been on the German market since last autumn.

BMW has told dealers it plans to follow the same pricing strategy with all its new cars, the ZDK said in a statement.

A BMW spokesman said: "We feel we have a sound legal position and are not concerned by the claim."

The dealers lodged their complaint on Tuesday after months of talks with BMW, the ZDK spokesman said.