Mercedes, BMW dealers see earnings drop on promotions

Sales offices of Han Sung Motor, left, and Deutsche Motors in Seoul / Courtesy of each firm

Major dealerships from Mercedes-Benz Korea and BMW Korea have suffered drastic falls in earnings due to an excess of promotional campaigns, data and industry officials said Wednesday.

Han Sung Motor, the largest dealer of Mercedes-Benz Korea, reported an operating loss of 64.9 billion won ($45.5 million) last year, 18.1 billion won more than the previous year.

Deutsche Motors, the most influential dealership for BMW Korea and MINI Korea, is in a similar situation. Their operating profit also fell to 25 billion won, down more than 40 percent from the previous year.

Industry officials argued the earnings decline for luxury carmakers can be attributed to promotional campaigns.

“Major dealerships for German carmakers here hold excessive promotional campaigns to remove inventory,” an official from a local carmaker said. “Things will not take a turn for the better unless luxury carmakers’ dealerships stop responding to pressure from carmakers by using cutthroat sales techniques.”

According to data from the Financial Supervisory Service, sales for Mercedes-Benz Korea fell by 28.4 percent in 2024 from a year earlier. Sales for BMW Korea also declined by 1.9 percent during the same period.

Experts say that unreliable pricing policies will end up weakening brand value.

“Audi Korea lost its brand value rapidly, as the carmaker conducted unpredictably strong promotional campaigns,” said Kim Pil-soo, a professor of automotive technology at Daelim University College.

However, some dealerships for both carmakers managed earnings rebounds. Star Motor, a dealership for Mercedes-Benz, attained an earnings rebound of 2.3 billion won in operating profit after incurring a loss of 200 million won in 2023.

Handok Motor, an influential BMW dealership, also increased its operating profits by 1.9 billion during the same period.

Another official from a luxury carmaker said the promotional campaigns for luxury carmakers will not come to an end anytime soon.

“There's high demand for BMW Korea and Mercedes-Benz in Korea,” an official from another foreign carmaker said. “Unlike other luxury carmakers, both automakers experience strong sales pressure from their German headquarters, which makes it harder for them to put a stop to excessive promotional campaigns.”

An emerging rivalry over electric vehicles (EVs) from local carmakers — such as Hyundai Motor and Kia — may also create downward pressure on earnings for both carmakers' dealerships, according to the official.