By on August 15, 2012

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.

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11 Comments on “WSJ Catches BMW Goosing Sales Numbers, Misses Volt Goosing...”

  • avatar

    Cadillac did the same thing in 1998 to wrest the sales crown from Lincoln. Hopefully BMW resorting to such tactics is an indication that a decade from now they’ll be as relevant as Cadillac and Lincoln.

  • avatar

    (previous comment caught in moderation trap …)

    The Volt “incident” in March was really just cash on the hood, not goosing of numbers, as the number of demo units did not change — GM just provided additional incentive to encourage selling the existing demos to end customers (and taking of replacement demo units by dealers).

  • avatar

    Correct me if I’m wrong, but doesn’t selling a demo unit to a customer, even at a discount, and taking a new one, end up with the sale of a car to a customer, albeit at a discounted price, thereby constituting a “sale” in any sense of the word?

    On a more interesting note, is there any way to get my hands on a list of the demo BMWs sold to the various dealers? Sounds like a great piece of negotiating ammo for a severe discount to me!

    • 0 avatar
      Chicago Dude

      Yes, to me what GM did and what BMW did are the same only if the BMW dealers sold demo cars to replace the new ones they bought. If Bertel is willing to reply with a clarification that would be very nice.

      And if that is the case, is there a way for ME to get in on the action? More importantly, is Porsche also doing this to clear out Caymans in advance of the imminent new model introduction?

    • 0 avatar

      Seems to me like an unnecessary dig at GM (since this is TTAC, frankly not shocking).

      It’s pretty clear that GM, unlike BMW, didn’t count the Volt sold until it was actually delivered to a customer and that the dealers would get a new Volt for demo purposes after they sold their current Volt demo.

  • avatar

    Although I am a subscriber/daily reader of the WSJ and am actually paid up for a little while longer, I totally missed this.

    I am disappointed that the article did not cover the broader scope of sales-number goosing for the entire industry, to include loss-leaders and massive numbers of vehicles being donated (for US tax credit) to various governments as foreign aid.

  • avatar

    no surprises here: “must appear to have growth” – goverment order.

    and im not picking on americans this time around, same bs happening in europe as well.

    gotta make the western economies looking good, ya know, or at least better than the chinese, so lets fake our numbers and make em chinese look baaaaad coz, ya know, they slowed down from 8.6% growth to 8.2% growth. sure thing boss WINK WINK

  • avatar

    And here is my question, how many Camry’s can you make a min? or, how many F150’s can you make in 24 hours? according to July report, 30k Camry and 50k F150.
    Is it possible?

  • avatar

    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.

  • avatar

    “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.

    • 0 avatar

      Like you, I am always wary of the negative image associated, either fairly or unfairly, with luxury car owners. The perception of arrogance, entitlement, and superiority is one propagated through the car fora as well as in casual conversation with friends and colleagues. Through a set of circumstances mostly out of my control, I ended up with an E90 328i as my daily driver for the past two years. I was quite conscious of the negative aura I was now personally projecting, fully expecting angry raised middle fingers and curses for just going about my daily driving routine. You know what? Absolutely nothing happened. My car wasn’t keyed, not a single wayward honk, nor a discouraging word came my way.

      While I have since sold the BMW (nice car, but I like the friskiness of my new GTI much better), I came away with the realization that this insulated world of automotive enthusiasm perpetuates stereotypes , often for fun (Jeremy Clarkson is a master of it), but the general public for the most part simply doesn’t care. The only reaction I ever got was, “nice car”. Of course, a-bottom-of-the-US-line BMW doesn’t scream “look at me!” the way a Mercedes SLK might, but I found the overall experience much less confrontational than I feared.

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