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Audi dealers in China threaten to suspend sales on venture talks

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Audi's dealers in China are threatening to suspend sales of the luxury German brand if the company doesn't drop a plan to produce and sell cars with SAIC Motor Corp, which could add more distributors and potentially depress profits.

[BEIJING] Audi's dealers in China are threatening to suspend sales of the luxury German brand if the company doesn't drop a plan to produce and sell cars with SAIC Motor Corp, which could add more distributors and potentially depress profits.

A group of Audi dealers met with executives from the carmaker in Foshan, China, on Monday to voice their concerns about the automaker's plans with Shanghai-based SAIC, according to China Association of Automobile Dealers official Song Tao. He denied reports that the dealers were seeking 1 billion yuan (S$206.8 million) in compensation, without giving more detail.

SAIC and Audi parent Volkswagen AG signed a memorandum of understanding on Nov 11 in Germany to explore the collaboration. VW now makes Audis in China exclusively with China FAW Group Corp.

VW and SAIC will look at manufacturing Audi-brand cars at its existing equally held venture in China, producing new-energy vehicles, as well as selling imported Audi cars together.

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The talks follow the first annual decline in sales for the premium brand in China since 1988 as it tried to remake its image as the favorite ride for government officials in China and as state-owned FAW remains mired in a corruption probe that has seen its chairman and several senior executives removed by the Communist Party.

Audi takes the interests of its dealers very seriously and will hold open and direct talks with its network partners, the company said in an e-mailed statement. The automaker is committed to volume growth together with the FAW-VW dealership network and will intensify the partnership with FAW with a 10-year growth plan, it said. Representatives for SAIC Motor and FAW weren't immediately reachable for comment.

Audi's deliveries in China including Hong Kong have increased 5.7 per cent in the first 10 months of this year, trailing the 10 per cent and 29 per cent gains in China by Germany's BMW AG and Daimler AG's Mercedes-Benz, respectively, according to data from the companies. Even so, Audi still ranks as the top luxury car brand with about a third of the market share, followed by the two competitors, according to the nation's Passenger Car Association.

Audi will intensify its cooperation with FAW by setting up a joint venture on mobility and digital services next year, according to the Ingoltstadt, Germany-based company.

It will also add five locally produced new-energy vehicle models in China through the FAW-VW joint venture within the next five years, and offer at least one electric SUV and sedan model in all volume segments by 2025.

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