Nissan Korea launched last month a new SUV model Qashqai, but is confronted with dealers’ backlash on the curtailment of dealer margin. A person  in charge argues that Nissan Korea is expecting a surplus of 30 billion won this year thanks to the depreciation of yen, but in order to strike off the accumulated loss they are cutting down dealers’ margin.

It was confirmed by the importer industry that Nissan Korea has peeled off the dealer margin in line with a new car introduction. Nissan Korea has 10 dealers and 16 showrooms across the country, and the dealer’s margin is told to be 14% on average. But Nissan Korea cut down the margin 1% to 13% on the launch of Qashqai.

Dealers repelled the cut-down. A dealer said that “Nissan Group’s net profit jumped 18% in the third quarter, helped by the continuing yen rise,” criticising “the measure of reducing the margin is severe when dealers are trying to expand sales, overcoming the past several years’ hardships.”

Nissan Korea however is dispelling such a repercussion. A person at Nissan Korea explained that “Nissan has always been adjusting the margin, and it was calibrated 1% lower than the existing Altima’s 14% margin.” and added that “The measure is only for increasing the competitiveness of the new SUV.”

The dealers are objecting such an accounting as there have been no actual cases of lowering down the margin without any concurrence. A person in charge said that “In the past when all were suffering from economic crisis, margins for both the importer and dealers were pared down simultaneously at the same rate, but the dealers’ opposition dismissed such a try.”

Another person said that “Importers are utilizing a ‘reserved margin’ system on the concept of incentives in order to promote sales, but it is on the format of basic margin plus extra premium, and so the method of lowering down basic margin for a compensation at the year-end is not used recently.” The said ‘reserved margin’ is a method for promoting sales – both the importer and dealer agree sales target beforehand, and when the target is achieved some extra margin is given to the dealer.

Some analysts say that such a measure may be the head office’s policy to settle the accumulated loss. A person in charge said that “Nissan Korea has 100 billion won at a loss, and so this year’s profit of 30 billion won, as expected, would enforce scaling down of the dealer margin.” and “Dealers had no other way but to agree with the cut-down.”

In the meantime, the Japanese car importers, including Nissan, Toyota, and Honda, who are benefitting from low yen, are expecting over 10 billion won profit this year in spite of reduced sales volume. Toyota Korea, for instance, is expecting that all their Lexus dealers will make profit owing to sales increase of new models, and eying Toyota dealers’ escape from loss so far. Honda Korea is also anticipating black figures with extra profits at the motorcycle sector that is expanding 30% every year, despite slackening car sales.