Audi seeks second China partner after first annual sales drop

[BEIJING] Volkswagen AG, which manufactures Audi vehicles with China FAW Group Corp, is seeking to add SAIC Motor Corp as its second production partner for the luxury brand after the marque suffered its first sales drop in almost two decades in the world's biggest market.

SAIC and VW signed a memorandum of understanding on Nov 11 in Germany to explore the collaboration, Shanghai-based SAIC said in a statement. The companies have an existing joint venture making VW- and Skoda-brand cars.

The two automakers will look at establishing an equally held joint-venture sales unit and manufacturing new-energy vehicles, as well as selling imported Audi cars together, according to the SAIC statement. VW owns a minority stake in the partnership with FAW. For SAIC, producing and selling Audis will give it an added source of income and foothold in the lucrative premium market.

Audi's China sales dropped for the first time last year since 1988 as it tried to remake its image as the favourite 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.

Deliveries in China have increased 5.7 per cent this year, trailing the 10 per cent and 29 per cent gains 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 in China with about a third of the market share, followed by the two competitors, according to the nation's Passenger Car Association.

Shares of SAIC fell 1.1 per cent to 23.72 yuan as of 11:16am in Shanghai trading, erasing an earlier gain.

BLOOMBERG