BMW will pay 5.1 billion yuan ($820 million) to auto dealers who pressured Europe's top luxury automaker to share the cost of overstocked dealerships in China.
BMW's main Chinese dealership group confirmed the news on Monday.
Car sales in China, the largest car market in the world, was predicted to drop to seven percent in 2014, lowering demands for compensation from dealer groups which had purchased vehicles based on expectations of rapid growth.
"This is the biggest such subsidy we've had in China because last year, dealers had the highest level of stockpile," said Song Tao, deputy secretary general of the China Automobile Dealers Association (CADA), which had represented the dealers in the negotiations, according to Reuters.
"I'm glad the negotiations ended with champagne," Song added.
Other foreign automakers like Toyota, who are working with their dealers in China as well, have complained to the government that they are forced to buy too much stock, which leads to large losses in a slowing market.
In 2012, BMW started subsidizing its dealers over falling retail prices. The payout in 2013 was around 3 billion yuan, according to a senior executive at a China-based BMW dealership, who was not identified by Reuters.
China remains the main battleground for BMW when it comes to remaining the largest luxury auto maker by sales.
BMW's rivals have recalibrated their China sales due to an economic slowdown and moves by local authorities like anti-trust fines and investigations.
BMW said recently it is sticking to its full-year target however of selling more than 2 million vehicles worldwide.
"Many automotive dealers in China had experienced pressures and challenges from the market in the second half of 2014," BMW said in a statement emailed to Reuters.
The German automaker maintained its lead over automakers like Mercedes and Audi thanks to strong sales in China during November.
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