BMW Cutting Production, Prices in China to Meet ‘New Normal’

Updated on
BMW’s China Chief Karsten Engel
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. Photographer: Brent Lewin/Bloomberg

BMW AG has reduced prices on some models in China and will cut production there to prevent a buildup of unsold cars in a sign that luxury demand in the world’s largest auto market is softening.

BMW has scaled back manufacturing in the country to lower supply for its distributors and will cut output again in the second quarter, said Karsten Engel, BMW’s China chief, who declined to give specifics.

The German company is adjusting to “a little bit of a trend downwards,” Engel said in an interview Monday at the Shanghai auto show. “This is the new normal and we have to accept this, and we have to adapt to this.”

Foreign automakers including Ford Motor Co. and Volkswagen AG have cut prices by much as 10 percent in recent weeks, with growth in international brands slowing almost to zero, according to Sanford C. Bernstein & Co. Demand for luxury products has also been hit as an austerity and anti-corruption drive under Chinese President Xi Jinping extends into its third year.

The company, the world’s biggest maker of luxury vehicles, ranked second in Chinese deliveries last year among the top three global premium auto brands, with Volkswagen’s Audi division staying No. 1, a lead it has held for about a quarter of a century, and Daimler AG’s Mercedes-Benz placing third.

Shanghai Presentations

BMW is at the Shanghai show for the world premiere of its X5 sport-utility vehicle’s plug-in hybrid version, along with Asian or Chinese debuts of its 2-Series Gran Tourer wagon and convertible and coupe variants of the 6-Series.

Mercedes is displaying a “near-production” prototype of the GLC compact sport-utility vehicle coupe at the show. Daimler Chief Executive Officer Dieter Zetsche predicted in early April that Mercedes will have “tremendous opportunities” in China because of new models and first-time buyers’ tendency to opt for an upscale auto.

SUVs and compact cars will be BMW’s main growth areas in China, said Engel. BMW will build and sell a China-only sedan marketed below the 3-Series, he said.

— With assistance by Alexandra Ho

Before it's here, it's on the Bloomberg Terminal. LEARN MORE