Volkswagen AG is offering financial assistance totalling 1 billion yuan (USD161 million) to support some of its dealers in China as demand slows in its largest market. The funding will be paid to distributors selling VW brand cars made by the company’s joint venture with China FAW Group Corp.
Volkswagen, the biggest foreign automaker by sales in China, is the latest company to extend financial subsidies to distributors hit by the slowing economy and a stock market that erased USD4 trillion in market value in less than a month. BMW AG earlier this year agreed to pay subsidies to its distributors in China to help cover losses after retailers stopped ordering cars from the manufacturer.
“VW has been under particular pressure due to its lack of SUV product at a time when SUVs are growing much faster than the overall market,” said Janet Lewis, an analyst at Macquarie Group Ltd. in Hong Kong. “Funds have been diverted by the stock market, so hopefully consumers have not lost much or panicked over the past few days.”
Auto sales in China fell for the first time in more than two years in June. VW and other carmakers have cut prices to defend market share as demand slows and domestic rivals lure increasingly value-conscious customers with cheaper sport utility vehicles. VW’s sales with its joint venture partner FAW fell 10 percent in the first six months of the year, according to data compiled by Bank of America Corp.
