Audi Scraps Plans for New China Dealer Network

(Beijing) — German luxury-car maker Audi said it will suspend talks on a new sales license for SAIC Motor Corp., its second partner in China, after existing dealers complained that many were already losing money as the brand's growth stalls.

Audi China announced the decision on Thursday after meeting with representatives from its 431 dealers nationwide, all of which sell cars manufactured by a joint venture between Audi and its original Chinese partner, FAW Group Corp.

The dealers' protests began three weeks ago after Audi signed a production joint venture deal with SAIC, breaking FAW's previous monopoly on the market. Dealers threatened to stop increasing their stocks if Audi didn't provide a satisfactory response to their concerns by Thursday this week, a dealer representative told Caixin, speaking on condition of anonymity.

As a result, Audi, a unit of Germany's Volkswagen AG, said it will resume talks with SAIC at a later date only if it could ensure long-term stable profitability for existing dealers. The latest decision made no mention on any effect on new Audi car production from the SAIC joint venture.

China is Audi's largest global market, with sales totaling 570,889 cars last year. But that figure was down 1.4 percent from a year earlier, marking the first decline in Audi's 26-year history in China. The drop came as the company faced growing competition from German rivals BMW and Mercedes-Benz, which both posted gains for the year.

Audi's dealers, who set up their alliance days after announcement of the SAIC joint venture, have since met with the German automaker's executives three times to state their objections to the deal.

During the second meeting on Nov. 21, in Foshan, Guangdong province, dealer representatives complained that the current sales network is already too large, resulting in losses for the majority of them. It will take two months to sell off current Audi cars still in stock, a dealer in Beijing told Caixin.

So far, FAW hasn't publicly talked about the issue, though a source previously told Caixin that company officials were also unhappy about the SAIC joint venture. FAW might join Audi's negotiation with SAIC if necessary, according to Audi statement.

Contact reporter Coco Feng (renkefeng@caixin.com); editor Doug Young (dougyoung@caixin.com)