The Securities & Exchange Commission's inquiry into BMW's past sales practices is likely to have some dealers buzzing at the brand's make meeting Sunday.
The regulatory agency is said to be looking into whether BMW engaged in a practice known as sales punching in the U.S., according to press reports last year.
BMW has declined to comment on the specifics of the probe.
The SEC inquiry, which a source told Automotive News concerns matters that date back to 2015, threatens to tarnish BMW's strong sales performance last year. BMW snatched the luxury-sales crown from rival Mercedes-Benz, finishing 2019 with sales of 324,826 vehicles, up 4.4 percent from the prior year.
Punching is the self-registration by dealerships of vehicles in loaner or rental fleets. It can occur as the result of pressure from an automaker to meet dealership sales targets.
BMW dealers have coined a term for the practice and the investigation: "Punchgate."
It's not an ideal practice, "but it happens," former BMW of North America CEO Ludwig Willisch conceded at an industry event in March 2016. At the end of 2015, "there was a lot of pressure, not only by us" to rack up sales numbers, Willisch said.
But any need for sales punching has declined in recent years as BMW better aligned its product mix with customer demand. Popular crossovers now account for 58 percent of BMW's product mix, up from 43.9 percent two years ago.
Sales punching erodes the brand and can alienate customers, said one BMW dealer, who asked not to be identified.
"Dealers have told BMW this is a joke for years," he said. "I am surprised that they don't have some class-action lawsuit between the dealers and BMW.