Audi forges new link to boost sales

Facing stiff competition, automaker teams with SAIC Motor to manufacture premium, new-energy models in China

Audi AG has joined hands with China's largest automaker SAIC Motor to localize and sell its cars, a move to consolidate its beleaguered lead in the country's premium car market.

Shanghai-listed SAIC Motor said in a letter to investors on Nov 14 that it had signed a memorandum of understanding with Audi's parent company, Volkswagen AG, at its headquarters in Wolfsburg, Germany, on Nov 12.

Under the agreement, the Audi models to be produced at SAIC Volkswagen will include new-energy vehicles, and the joint-venture will explore the possibility of smart mobility services.

Audi was tight-lipped about the issue, saying that SAIC Motor "entered cooperation talks with Audi AG to evaluate long-term collaboration in China".

Although neither side offered details about their cooperation, Chinese media reports say SAIC Volkswagen will manufacture Audi models as an original equipment maker.

As part of Volkswagen AG, Audi is not allowed to build its own manufacturing joint ventures in China as Volkswagen already has two: SAIC Volkswagen and FAW Volkswagen.

According to the nation's industry policies, a foreign automaker can have no more than two manufacturing joint ventures in China, and if one automaker has controlling stakes in another, they are regarded as one automaker.

Audi has been the champion in China's premium car market, but it is losing steam to its competitors.

Statistics show that Audi sold 440,233 cars on the Chinese mainland and in Hong Kong in the first nine months of this year, 6.2 percent growth year-on-year.

In comparison, BMW's sales in the same period rose 10.6 percent year-on-year to 379,000 units, and Mercedes-Benz sold 344,791 units in the same period, a 29.5 percent surge year-on-year.

FAW Volkswagen, in which Audi has a 10 percent stake, is now localizing and selling Audi models in China.

Li Yanwei, an auto analyst at the China Auto Dealers Association, says Ge Shuwen, former deputy general manager of FAW Volkswagen's Audi division, may join SAIC Volkswagen to head its Audi unit.

Industry insiders say Audi has to carefully tackle the problem of how to balance its relations with the two partners.

Audi said on Nov 14 that the two will intensify their cooperation and FAW-Volkswagen will add five locally produced Audi e-tron models to its China portfolio - including pure battery vehicles with a range of more than 500 kilometers, within five years.

"Audi and FAW have cooperated closely for more than a quarter of a century. With our long-term growth strategy we will build upon this successful partnership," said Rupert Stadler, chairman of the board of management of Audi AG.

Audi dealers, who were not informed of the deal in advance, are voicing their anger, demanding a response from Audi about how to protect their interests.

A public letter from the CADA Audi Dealers Association says some dealers are faced with high inventory and "the interests of Audi dealers will be further damaged if you set up a new sales company".

There are currently around 500 authorized Audi dealers across the country.

lifusheng@chinadaily.com.cn

(China Daily Africa Weekly 11/18/2016 page29)