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| Seen is a BMW 7 Series sedan. Korea Times photo by Kim Hyung-joon |
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BMW Korea was found to have sent over 1.5 times its operating profit to its German headquarters last year as it achieved its highest-ever sales in the country, according to government data, Thursday.
There is no legal issue with sending dividends to overseas headquarters. However, industry officials said that sending a significant amount of dividends to its overseas headquarters ― despite earning high profits in the Korean market ― reflects a low commitment to the development of the country's automotive industry.
"It is unfortunate that the profits earned in the Korean market are being sent to their overseas headquarters," an official in the local automotive industry said on condition of anonymity.
"Expanding dividends sent to overseas headquarters, instead of reinvesting profits earned here in the development of the domestic automotive industry, seems to reflect a perspective that views the Korean market merely as a source of revenue for selling high-priced vehicles."
According to the Financial Supervisory Service, BMW Korea generated 5.79 trillion won ($4.418 billion) in 2022, up 23.9 percent from a year ago. Its operating profit last year was at 144.8 billion won and net profit was at 95 billion won. However, the dividend payment to its headquarters was 215.3 billion won, more than triple the 70 billion won sent in 2021.
The preference for imported car brands in the Korean market has been steadily increasing. According to the data by the Ministry of Land, Infrastructure and Transport, the total number of registered imported cars in Korea was 3,233,313 as of March, accounting for 12.6 percent of the total registered vehicles of 25,646,614. This means that 12 out of 100 cars on the road here are imported.
Among the many imported car brands, BMW has been particularly well-received by Korean customers.
According to data from the Korea Automobile Importers & Distributors Association, BMW had the second-largest market share of 27.71 percent of the country's imported car market in 2022 as the German brand sold 78,545 vehicles. Mercedes-Benz topped the market with a 28.57 percent share after selling 80,976 vehicles last year.
Another industry official pointed out that excessive dividend payouts could lead to a deterioration of the financial soundness of the company's Korean unit.
"Typically, a high dividend payout ratio implies that a company's retained earnings are low, which can lead to an unhealthy financial structure," the official said.
Regarding that, a BMW Korea spokesman said, "It is not inherently wrong for a company with overseas headquarters to send dividends to the headquarters. While it may seem like a large amount when we only look at the amount of last year's dividend, if we look at it from 2008 onwards, we have sent dividends five times. There are other imported car brands that has sent dividends of over 400 billion won during the same period."
The spokesman added, "BMW is a brand that makes efforts to grow together with Korea's automotive industry. We also reinvest a significant amount back into Korea as the total amount of parts purchased from domestic companies amounts to about 4 trillion won. We hope that these aspects can be considered more positively."
