At the 2015 Shanghai Motor Show, BMW has announced a price reduction for the Chinese car market, along with production cuts, a sign that luxury demand in the world’s largest auto market is softening.

In a letter sent by Chinese dealerships to BMW earlier last week, dealers pressed BMW to set more realistic sales targets, lower wholesale prices and extend grace periods for payment. Initially, BMW set a target sales goal of 500,000 in China this year, a 10 percent increase over 2014.

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. “We’re adapting to the situation to make sure dealers are not overstocked,” Engel said. “It’s a little bit of a trend downwards,” he said. “This is the new normal and we have to accept this and we have to adapt to this.”

bmw china

Ford and VW Group have also cut prices by much as 10 percent in recent weeks.

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.

BMW says the Chinese market will grow in the SUV and compact cars segments, therefore the company is preparing a China-only sedan marketed below the 3 Series. This is likely to be the 1 Series Sedan.

[Source: AutoNews]