Did BMW Pad U.S. Sales in July to Outdo Mercedes?

BMW AG reported U.S. sales of 21,300 vehicles under its namesake brand last month, nearly 2,000 more than Mercedes-Benz and enough to narrow its rival's sales lead for the first seven months of 2012 to 132 units.

Or did it? The Wall Street Journal reports that BMW offered its American dealers a one-day discount of as much as $7,000 per 2012-model vehicle on July 31 as long as the unit was reported as sold that day. The newspaper notes that sales of 7 Series sedans tripled year over year to 1,700 units and 3 Series coupe volume more than doubled to 2,600 units.

The company tells the Journal the cars were sold as "demos," which dealers use for test drives. BMW says its incentives help dealers clear out stock from the outgoing model year. But the carmaker adds that demonstrator vehicles should be sold as used cars.

BMW wouldn't say how many demos it sold in July. But its dealers tell the newspaper that a few thousand cars recorded as sold remain in showrooms and are advertised for sale as new vehicles. Dealers note that selling out 2012 models early helps BMW's North American sales unit persuade bosses in Stuttgart it needs a generous allocation of scarce 2013 models.

BMW and Mercedes were neck and neck in 2011 U.S. sales until the former's December sales put it ahead for the year by about 2,700 units.

The Journal notes that padding volume tends to backfire. The incentives are costly, and reported sales usually ebb afterward when consumers purchase vehicles previously reported as sold.

The most famous recent case of sales inflation occurred in December 1998 when General Motors' Cadillac brand bought cars from its dealers in a push to outsell rival Ford's Lincoln marque. Cadillac lost the luxury sales crown when it was forced later to admit the subterfuge.