WSJ Catches BMW Goosing Sales Numbers, Misses Volt Goosing
The Wall Street Journal has an extensive report in which Neal Boudette caught BMW cheating with its sales numbers. Boudette unmasked the shocking practice of car makers selling cars to dealers instead to customers: “Hundreds of BMWs counted as sold in July remain in showroom inventories and are still advertised for sale as new cars, according to dealers.” The WSJ dug deeper into the scandal.
The WSJ received reliable information that BMW “made a special offer to dealers on July 31. For one day only, the dealers would receive discounts of as much as $7,000 per 2012-model car as long as each vehicle was reported as sold that day.”
The paper gave BMW spokesman Kenn Sparks the third degree and made him admit that BMW’s “July sales total includes vehicles that were purchased by its dealers for use as what are known as “demos”— cars used on lots for test drives.”
This, says the WSJ, “raises questions about the accuracy of the company’s reported sales, a closely watched figure as BMW and rival Mercedes-Benz vie for the title of top-selling U.S. luxury brand.”
Not that the WSJ is ignorant of shady practices. The WSJ says it has heard of “car companies, which book revenue when they ship to dealers, are known for using a variety of tactics to improve sales beyond what consumers purchase, such as cut-rate deals with rental-car fleets and incentive that get dealers to stock more vehicles than they need.”
The demo deals were news to the WSJ. The paper needs a little training in the time-honored art of number goosing.
The demo deal is an ancient ploy when a sales chief wants to make his numbers. It is just one sample from a rich arsenal of number-enhancing methods. (We encourage our car dealing readers to come forward with the ultimate guide.) As a matter of fact, the WSJ missed another possible scandal. Says the WSJ:
“Last year, General Motors Co. required Chevrolet dealers to stock at least one Volt electric car as a demonstration model and more than 1,000 were shipped as demos. But GM only counted them as sold when they were delivered to customers, a spokesman said.”
Pulled the wool right over your head, Wall Street Journal! In March, there was a sudden spike in Volt sales, which caught many analysts and journalists by surprise. After all, Volt production was on halt due to slow sales. Magazines like Forbes dug for a reason, but came up empty. We heard from a very reliable source that GM gave dealers a sizeable cash bonus if they would sell their existing demo unit, and take a new one. This was a repeat of a similar program at the end of 2011. Shocking I say, shocking!
P.S.: This huge scandal is collateral damage from the war of the luxury models. It is an annual sales race between BMW, Mercedes and Lexus, which appears to be a hobby of the financial press, namely the Journal and Bloomberg. They doggedly track (and probably have office pools on) every lap of this race. Most other countries never heard of this odd spectator sport.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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The initial Volt units sent to dealers were required to be in demo service for 6 months to keep from being "penalized" for the extra unit which was over and above your allocation at launch. If you sold it prior to the 6 month period expiring you had to immediately replace it with one from stock. Conveniently the Volt was added to the dealer daily rental program this past spring which gives the dealer a $3000 incentive for it being in the program for 3 months, whereas the the demos gave us no allowance.The dealer daily rental is essentially a loaner car for warranty customers. I took mine out of demo and punched it to DDR service at about 3 months and having 4K miles. The other acummulated no miles while waiting for the final 3 months to expire. Punching it to DDR service generates a sale in the GM system, demo status does not.
"P.S.: This huge scandal is collateral damage from the war of the luxury models. It is an annual sales race between BMW, Mercedes and Lexus, which appears to be a hobby of the financial press, namely the Journal and Bloomberg. They doggedly track (and probably have office pools on) every lap of this race. Most other countries never heard of this odd spectator sport." While I suppose this is relevant to the target buyer, I've also hit an income level where many people would expect me to be interested in a luxury car. However, I probably won't be buying one because of the way luxury car owners have treated me in traffic over the years. I don't want people to assume "omigod, there's a guy in a BMW, I bet he's going to be a jackass ... yup, cut me off". Yes, there is a memory effect here (I'm more likely to remember seeing a car that cuts me off), but perception is reality for brands, and this is my perception. I'm not about to pay $40k to join THAT club. The Volt, though, is another matter. I like it because of the interesting tech under the hood. And interior comforts do a surprisingly good job of justifying the higher price. And there's nothing wrong with it being a Chevrolet - and I'd finally be able to Buy American after decades of the majors failing to produce a nice small/efficient car. I'll take the Volt over a BMW every day of the week! P.S. My office parking lot has a surprisong number of $40k+ minivans. They cost as much as a luxury car, and they have most of the same comfort and features. But they're better for hauling kids and they look more modest from the outside. Perfect! It's actually a pretty good statement about the family-friendly culture of the place and what people do with their above-average income.