Jan 05, 2015 05:24 AM EST

BMW agrees to pay $820 million subsidies to China dealers

TAG:BMW, China

(Reuters) - German premium carmaker BMW has agreed to pay 5.1 billion yuan ($820 million) of subsidies to its dealers in China, ending months of bickering over who should bear the brunt of a market slowdown in the country last year.

"This is the biggest such subsidy we've had in China... because last year, dealers had the highest level of stockpile," said Song Tao, deputy secretary general of the China Automobile Dealers Association (CADA), which had represented the dealers in the negotiations.

"I'm glad the negotiations ended with champagne," Song said in a phone interview.

BMW started subsidizing its dealers in 2012 due to falling retail prices, with the payout in 2013 around 3 billion yuan, according to a senior executive at a China-based BMW dealership who declined to be identified.

BMW declined to talk about subsidy amounts in previous years.

Other foreign automakers such as Toyota Motor Corp are also negotiating with their dealers in China, who have complained to the government that they are obliged to buy too much stock, leading to large losses in a market which saw the pace of growth halve last year.

"Many automotive dealers in China had experienced pressures and challenges from the market in the second half of 2014," BMW said in a statement emailed to Reuters.

"BMW and its dealers ... reached consensus on the structure of optimized business measures and financial allocation for the dealers, so as to jointly overcome the short-term challenges."

BMW declined to provide further details of the deal or confirm the subsidy amount.

The firm's shares were down 2 percent in early trading in Germany.

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