Audi Moves Up a Gear With FAW Venture

German luxury car-maker Audi AG is forming a new joint venture with Chinese automaker FAW Group Corp., as its sales growth stalls in the world’s largest auto market.

The venture is expected to begin operations by the end of 2018, an Audi statement said on Wednesday. The venture is an expansion of an existing Audi-FAW joint venture’s sale division.

The stake-holding structure of the new venture will follow the current model of FAW-Volkswagen Automobile Co. Ltd, (FAW-VW), in which FAW accounts for 60%, Audi takes up 10% and Volkswagen Group 30%, an inside source told Caixin.

FAW-VW is a joint venture set up in 1991 between FAW and Volkswagen Group which manufactures Audi and Volkswagen marque passenger cars for sale in China.

Despite being the leader in China’s luxury car segment, Audi has increasingly faced challenges from German peers such as Mercedes-Benz and BMW AG. Audi’s car sales rose only 1.5% to 597,900 units last year, while Mercedes-Benz surged 23% to 588,000 units.

Audi’s development in China was marred by a controversial move in late 2016, when it decided to launch a new dealer network with a second Chinese automaker, SAIC Motor Corp.

The move came as Audi reportedly wanted to have a second network to increase its profit sharing in the lucrative auto market.

The move however caused protests from Audi and FAW’s 431 dealers nationwide, which said that would eat into their business. The German carmaker later said it decided to put the plan on hold.

Contact reporter Mo Yelin (yelinmo@caixin.com)