(Yicai) July 18 -- BMW and Audi are scaling back the discounts they offer in China this quarter as they make strategic changes, such as ending sales targets and easing inventory requirements for dealers, following severe losses stemming from acute price competition in the world’s biggest car market.

BMW China and BMW Brilliance Automotive, the German luxury carmaker’s joint venture in the country, canceled sales appraisals for dealers in eastern China, some of them told Yicai.

The move has eased the pressure on dealers, leading to discounts becoming smaller by an average of CNY13,000 (USD1,790) per auto.

After the last round of price cutting in May, BMW’s i3 lineup was reduced by CNY150,000 (USD20,660) to CNY200,000 (USD27,550) and its i5 lineup by CNY100,000 (USD13,780) to CNY339,900 (USD46,830).

Yicai learned that this May BMW decided to introduce a number of substantial subsidy reduction policies to its 4S -- sale, spare parts, service, and survey -- stores. These included a 3 percent price discount to help ease the cash flow pressure on dealers, a lowering of the rate on fines for overdue payments to 2.5 percent, and a halving of car demurrage fees.

Luxury carmaker Audi will soon introduce policies to reduce dealers' sales targets and inventory, a salesperson at an Audi 4S store told Yicai, which is expected to lead to gentler discounts.

Carmakers cannot control end prices because it would break anti-monopoly laws, said Li Yanwei, an expert at the China Automobile Dealers Association. But they can impact end prices by adjusting their supply volume structure and dealers' sales targets, Li noted.

Dealers came under intense pressure from inventories last month, according to the CADA. Its Vehicle Inventory Alert Index for dealers of luxury and imported brands rose 5.8 percentage points to 66.4 percent in June from May, with the index for JV brands and Chinese standalone makers up 4.6 points and 1.5 points to 60.8 percent and 61.5 percent, respectively. The boom-busted threshold is 50 percent.

Discounts offered by BMW Brilliance and FAW Audi Sales reached 26 percent in May, according to auto market data cruncher Zhiyun Souche. Other Chinese joint ventures of overseas luxury carmakers, such as Beijing Benz Automotive and Chery Jaguar Land Rover Automobile, also cut their prices by up to 42 percent in the period.

Despite steep discounting, BMW's sales in China fell 4.2 percent to 375,900 units in the first half from a year earlier. Audi's parent firm Volkswagen Group did not disclose Audi's sales data in China, but mentioned that its overall sales in the country plunged 7.4 percent to 1.35 million units. Meanwhile, Audi's global sales dropped 8.2 percent.

The two best-selling models in the Chinese market segment for cars priced above CNY300,000 were Tesla's Model Y and the Aito M7, co-developed by Seres Group and Huawei Technologies, which are two new energy vehicles.

Editors: Liao Shumin, Futura Costaglione