Audi Agrees to Compensate Dealers Amid Partnership Row

(Beijing) — Audi’s long-standing dispute with its Chinese dealers may not be coming to an end, but the German luxury-car maker has agreed to compensate them a total 6 billion yuan ($869 million) for weaker-than-expected 2016 sales anyway.

However, the compensation will take place only when the dealers, who object to Audi’s planned partnership with a second company, promise to fulfill sales targets for 2017 — an agreement that should have been finalized by the end of 2016 and has seriously influenced Audi sales.

The Volkswagen-owned brand topped car sales volume in China for more than two decades until it lost its throne in January amid disputes that started in November, when it announced plans for a new partnership with SAIC Motor Corp.

Audi’s past exclusive partner was FAW Group. Dealers from the old distribution network said that they would sign sales-target agreements only if this exclusivity is protected.

The new Audi-SAIC partnership has been postponed several times due to strong dealer objections, and details are still being negotiated, including Audi’s relationship in the old FAW system. In the latest version of the Audi-SAIC partnership agreement, Audi will authorize only the current FAW distributor term “main dealership,” without using the word “exclusive.” Audi said it had to remove the word “exclusive” as it is not allowed to avoid competition.

It is unlikely that this latest development will end the standoff, and dealers have demanded that Audi and FAW give feedback by Saturday.

Li Yanwei, an analyst at China Automobile Dealers Association, told Caixin that in previous negotiations, both sides agreed that the new Audi-SAIC partnership would launch only when sales reach 900,000 units per year in China, or nearly double the 2016 figure. The larger sales target is expected to be reached around 2022.

Contact reporter Coco Feng (renkefeng@caixin.com)