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Kia dealers in China seek 2.5b yuan compensation in revolt over unsold stock
[BEIJING] A group of over 100 auto dealers in China has said it would consider refusing to sell Kia Motors Corp brand cars unless it receives 2.5 billion yuan (S$520.353 million) in compensation for losses brought about by unsold stock.
The group made the comment to the South Korean firm's China joint venture in a letter seen by Reuters on Tuesday, in which it objected to the amount of inventory dealers are required to take on.
This is not the first time Chinese dealers have revolted over inventories. Two years ago, BMW paid US$820 million to dealers demanding compensation for unsold stock, and last year, dealers of imported cars for Kia sister company Hyundai Motor Co requested around US$135 million for lack of inventory.
The leader of the Hyundai dealers told Reuters on Tuesday that the matter was settled but declined to give terms.
A Hyundai-Kia spokeswoman declined to comment on either issue beyond saying the automakers were checking with relevant teams. A spokesman at Kia's joint venture partner, Dongfeng Motor Corp, did not immediately respond to a request for comment. Jiangsu Yueda Group Co Ltd, another Kia partner, could not be reached for comment.
Chen Keyun, the leader of the Kia dealers group, told Reuters on Tuesday that Dongfeng Yueda Kia (DYK) had yet to respond to the letter. Mr Chen said the group could consider halting sales or pursuing further action if DYK did not respond.
In the letter, the group requested monthly targets set in accordance with each individual dealer's inventory and sales rather than production levels. It also said it wants inventories limited to no more than 20 per cent above sales.
"The majority of DYK dealerships in recent years have recorded successive losses, long-term operating results cannot be improved, sales and after-sales markets are in disarray, high inventories have not come down, capital turnover is difficult to the point that the lines of (new) capital have broken," the group said in the letter.
Mr Chen said one of his three Kia dealerships lost three million yuan last year. He said, in compensation, the group has requested 2,000 yuan per car sold in the past two years, or about 2.5 billion yuan.