BMW claimed victory in the July premium brand race, reporting 21,297 sales, 1,986 sales ahead of arch-rival Mercedes-Benz. The strong month also left BMW just 104 sales behind the folks from Sindelfingen for the first seven months of the year.
However, according to a report in the Wall Street Journal, BMW dealers are saying that some of the vehicles included in the sales report are still in their showrooms; still waiting for a buyer.
According to dealers, BMW of North America made a special, one-day offer on July 31. For that day, the dealers would receive discounts of as much as $7,000 for each 2012 MY 7-series car reported as sold.
Dealers apparently took advantage of the offer to stock up on demonstrators, the cars the dealers use for test drives and other uses. Kenn Sparks, a BMW spokesman, said its July sales total includes those vehicles but declined to give a specific quantity, citing company policy.
Automakers book their revenue when they ship new vehicles to dealers; they’re known for using a variety of methods to improve their numbers beyond retail customer purchases, such as heavily discounted rental fleet deals and special incentives and even strong-arm tactics to get dealers to stock more vehicles than they need.
But, as the car companies have discovered, stuffing dealer lots and piling on incentives to move the metal can backfire. A short-term boost is usually followed by a payback slump when the promotions end. Deep discounting also can hurt a carmaker’s profit margins and erode the residual value of the vehicles themselves.
On paper, BMW’s dealer incentives look like they did the trick, giving the Bavarians the lead for the month. But as the chart shows, the July sales of 7-series cars, BMW’s most expensive standard sedan line with prices that start above $73,000, are far and away the best monthly numbers in the past 25 months. In fact, one has to go back several years to find a comparable monthly total in any month. Not only did the 7-series triple its sales from July 2011, it more than doubled the sales of competitive vehicles like the Lexus LS, Mercedes-Benz S-Class and Porsche Panamera.
The 3-Series coupe had spiffs totaling $3,200 and it, too, enjoyed a boom. Sales hit 2,555 units in July, more than double the 1,222 sold in June.
Most automakers require that vehicles designated as demonstrators must be kept for a certain period of time, usually 90 to 180 days. Some also require the vehicle to be sold as used. According to Mr. Sparks, BMWs purchased as demos are supposed to be clearly marked and sold only as used cars, as well, but dealers said they routinely offer the vehicles as new, with no objections from BMW.
BMW dealers are under competitive pressure from two sources: First, they’re in competition with other BMW dealers to get every factory penny they can to to be able to match or beat their rivals’ deals. Second, they are competing with BMW dealers in China for product allocations: they need to be able to show the 2012 inventory is being depleted so they won’t see a cut in the number of new vehicles BMW sends to the U.S.
So far, Daimler AG has had no response to the Journal’s report.