South Korea's Kia Motors Corp saw a significant drop in sales in the Chinese mainland market in January because of a dispute with local dealers who are facing narrowing profit margins.
Kia Motors' sales fell 38.9 percent month-on-month to 30,080 units in January, the Yonhap News Agency reported on Sunday, citing Kia and industry sources.
The decline is significant compared with growth it achieved last year and its sales target this year. Kia on January 6 reported a year-on-year gain of 4.4 percent in the Chinese market for 2016 and has reportedly set a target of 7.7 percent growth for this year.
Kia is facing a dispute with its Chinese dealers, who have reportedly asked for compensation for losses arising from unsold vehicles.
Domestic financial news portal yicai.com reported that some dealers filed complaints with Kia in mid-January to complain about "unfair prices" and the company's rebate policy.
Many smaller dealers are unhappy with Kia's approach to give cheaper prices for larger dealers, which they called "unfair," the yicai.com report said, citing Chen Keyun, an official with the All-China Federation of Industry & Commerce.
Also, Kia's policy requiring dealers to accept new cars to be eligible for annual profit returns angered many dealers, who face significant losses for unsold cars and rising inventory, yicai.com reported. About 80 percent of Kia's Chinese dealers are losing money or just breaking even, according to Chen.
Kia is the latest carmaker to face a dispute with local dealers amid slowing sales growth and rising competition in the Chinese auto market. South Korea's Hyundai Motors and Germany's BMW and Audi have faced similar disputes, according to media reports.
Passenger car sales posted better-than-expected growth of 15 percent in 2016, according to data released by the China Association of Automobile Manufacturers (CAAM) on January 12.
The gain was mostly driven by cars with smaller engines at the end of the year, when consumers rushed to take advantaging of a tax cut that was to expire at the end of the year, according to the CAAM.
The CAAM warned of a dim outlook for sales growth this year and forecast a 5 percent gain.
