[Laki021]

A bit more detail:


BMW Delivers an Unwelcome American Holiday Gift https://www.bloomberg.com/view/artic...with-sec-probe

Basically, nothing to fear about...

[TheBingoBalls]

Originally Posted by billnchristy

Loaners are never titled so they shouldn’t count as sales, that would definitely be shady.

Wrong. I can't say every dealership does this but I know some GTA dealerships actually license the demo's and loaner's to their name so technically, a sale has happened. Definitely a grey area but if a VIN is licensed/registered, it could be viewed as a "sold" unit.

[undertaker]

As an entry level F90 3 series owner, I am here frequently to admire the M! I peruse the websites of flagship dealers in NYC, Miami, LA etc. for observation and/or the next step in a potential purchase, and have noticed this deceptive marketing ploy. The corporate sales/marketing mechanism in action!

[babaikram]

This is a legal and common practice in the UK for all dealers and manufacturers. The dealer themselves would buy the car from BMW and registered them. They are then sold to customers at a very good discount with the dealer being the first owner and customers second owners. The vehicles are generally referred to as pre-registered cars.

This way the dealers are able to get the premiums from the manufacturers for meeting sales targets

[m52b2g]

Car sales people lying about numbers? 🤔

[LSM]

Very common all the manufacturers "punch" cars and they count in sales

[MysticBlue]

Originally Posted by undertaker

As an entry level F90 3 series owner, I am here frequently to admire the M! I peruse the websites of flagship dealers in NYC, Miami, LA etc. for observation and/or the next step in a potential purchase, and have noticed this deceptive marketing ploy. The corporate sales/marketing mechanism in action!

From a consumer's point of view, I'm not sure what's deceptive about it. If you buy a car off the lot, then you know how many miles it has on it. Personally, I would never buy a loaner, or executive demo, or whatever they want to call it, but if someone wants to take advantage of a discount, that's their business. I understand from a corporate point of view if they are encouraging widespread pushing the numbers one way or the other, you get into big picture quarterly sales figures that can be fudged and therefor you're messing with stock prices, etc. but from a customer's point of view, where's the deceptive marketing ploy?

[LexProf]

If indeed it is the punching of cars that is at issue, although that would not be a deceptive practice vis-a-vis customers, I could see it being a problem vis-a-vis investors. I guess it depends on what is disclosed in the quarterly reports and the like. If BMW is reporting punched cars as ordinary sales, without distinguishing them from sales made by dealers directly to ordinary customers, then that might be a problem in the eyes of the SEC. But I'm rusty on securities regulation, so my reasoning could be all wet

[RoseyLA]

check out these "demo specials". They all have around 2-5k miles. There are more where this came from. Not all are advertised.

[F30lolz]

I know a college friend who works for the SEC. I’ll text him and get to the bottom of this!

[SteveinArizona]

Originally Posted by 2una

Germany has been ignoring the US over a Russia to Europe gas pipeline the US has been trying so hard to get stopped. Be surprised if this is not just taking a poke at Germany.

The US even signed in a bill the other day where the company ship laying the pipe had to bail out else they were going to get hit with US sanctions.

OR...revenge for sticking with California on pollution controls!

[chassis]

Agree, as a consumer I don't feel any wrong has been done with the practice of punching cars.

From an investor's point of view, if punching has always been part of the game, then it does not materially affect unit sales, and therefore revenue, when comparing financial time periods such as months, quarters or years.

Where I can see trouble from an investor's point of view, is that:

- if punching is on the increase, making prior period unit sales incomparable and, or
- if punched cars are not reported in either dealer or manufacturer (BMW) inventory valuation

Can anyone make a definitive statement on which company, the dealer or the manufacturer, holds title to a punched vehicle?

[cfm56d7b]

Accounting rules are governed by FASB in the US. Two years ago, "FASB has introduced a plethora of new and revised accounting standards that are certain to impact automotive dealerships nationwide".

https://www.axiom-auto.com/wp-conten...tter-Vol17.pdf

I read the newsletter but did not find any specific guidance about revenue recognition of vehicles sold to dealers but not delivered to retail customers.

I am sure FASB has an applicable rule.

[positiveions]

Originally Posted by LexProf

So I wonder if this relates to the practice of moving cars from "new inventory" to executive "demo" status. Some of the dealers where I live seem like they do it a lot.

That happened to me on an X5. Lost BMWCCA 1k rebate. Was upset as hell. But 11% off discount couldn’t complain. Oh well.

[yousefnjr]

Wife just signed yesterday on a ‘20 X7 demo @ 14% below sticker, shady or not I hope these do not go away

[ScottyRyan2019]

Originally Posted by chassis

Agree, as a consumer I don't feel any wrong has been done with the practice of punching cars.

From an investor's point of view, if punching has always been part of the game, then it does not materially affect unit sales, and therefore revenue, when comparing financial time periods such as months, quarters or years.

Where I can see trouble from an investor's point of view, is that:

- if punching is on the increase, making prior period unit sales incomparable and, or
- if punched cars are not reported in either dealer or manufacturer (BMW) inventory valuation

Can anyone make a definitive statement on which company, the dealer or the manufacturer, holds title to a punched vehicle?

Here, the dealer titles the service loaner with the State of Minnesota and puts a personalized plate on it ( BMW 50 or something like that). Then when they turn around and sell it with maybe 4 to 5K miles on it is is sold as used at a discount and the last I knew with an extended warranty as well to make the sale even more attractive. Not sure if they still offer those or not?

[chassis]

ScottyRyan, thanks. You said the dealer titles the vehicle with the state of MN, correct? That means the state of MN views the dealer as the lawful owner, in which case ownership has passed from the manufacturer to the dealer. Do you agree?

Is this how "punching" works? Title passing from manufacturer to dealer?

[edofloat]

Originally Posted by chassis

ScottyRyan, thanks. You said the dealer titles the vehicle with the state of MN, correct? That means the state of MN views the dealer as the lawful owner, in which case ownership has passed from the manufacturer to the dealer. Do you agree?

Is this how "punching" works? Title passing from manufacturer to dealer?

Common practice. The dealer does own the vehicle once it is licensed, no different than any other entity.

Dealers delineate how the cars are “punched” in the Manufactuer’s sales reporting system. For example they have retail, fleet and a code for loaners amongst other types of punches.

In Minnesota, like most states, it is illegal to let customers driver cars as loaners with a dealer plate. A healthy fine. Dealer plates are for demonstration purposes. The state also wants to collect tax and license fees too for each loaner too. So the service loaners as others have pointed out normally are sold as CPO when they come out of the loaner pool.

Most manufacturers that have a service loaner program and likely operate it similarly. Seems like a money grab for the government.

[chassis]

I still don't see who is harmed by the status quo. The Federal government? State government? The consumer? An investor? Is a Federal, state or local statute being violated? The link in the OP does not give the basis for an objection from the SEC.

The only question I see here is whether or not the status quo affects share price, and therefore potentially harming an investor. But an institutional investor will understand how the business fundamentals work, including punching, and I argue that the institutional investor would not be affected by the status quo.

So the only party that might be harmed is the unsophisticated retail investor. I argue that the status quo has an immaterial impact on this investor segment.

p.s. I drove a service loaner this week from another manufacturer. "Dealer New" plate, state of Indiana.

[The Libertine]

Originally Posted by Darth One

If ‘punching’ cars is against the rules, there’s a bunch more automakers that they should be investigating...

I agree. Doubt that the purported practice is exclusive to BMW....

[///M TOWN]

Originally Posted by Laki021

SEC Investigating BMW Over Sales Practices

https://www.wsj.com/articles/sec-inv...es-11577131042

"Accordingly to people familiar with the situation...

...The people said..."

[Meeni]

Originally Posted by chassis

I still don't see who is harmed by the status quo. The Federal government? State government? The consumer? An investor? Is a Federal, state or local statute being violated? The link in the OP does not give the basis for an objection from the SEC.

The only question I see here is whether or not the status quo affects share price, and therefore potentially harming an investor. But an institutional investor will understand how the business fundamentals work, including punching, and I argue that the institutional investor would not be affected by the status quo.

IANAL but punching muddies the picture of real sales, revenues, and other performance metric of the publicly listed company. This is creative accounting and confusing the material facts about the business. This is obviously against the purpose of securities law for publicly traded comparies, and pretty clearly against the wording of the law as well (registering fake sales to inflate sales pictures that are presented to investors). The fact that everybody does it, or that it has been going on for a long time does not change the material offense.