FAW dealers cry foul as Audi links up with SAIC to expand sales

Updated 2016-11-23 12:25:40 Global Times

Domestic dealers are dissatisfied with Audi's decision to cooperate with SAIC Motor Corp in addition to FAW Group Corp, saying their profits will be hit with the establishment of the new sales channels that will also bring new dealers into the market and increase competition.

However, analysts said that Audi's move is understandable and more competition is actually positive as it will avoid any monopoly.

Domestic automaker SAIC announced on November 14 that it had signed a "cooperation framework agreement" with Audi's parent company Volkswagen AG for Audi to manufacture and sell in China in partnership with SAIC.

This means Audi will have two partners in China and new sales channels will be set up for the new joint venture, which will mean competition between new Audi dealers and the existing ones.

An Audi dealer based in East China's Jiangsu Province told the Global Times on condition of anonymity that he was angry about Audi's move to cooperate with SAIC, as the German luxury carmaker will create new sales networks that will damage the interests of existing Audi dealers.

"The profits of domestic Audi dealers are sliding. Some even face losses because of the launch of new products and slower sales growth. If new sales channels are established, our profit will undoubtedly be hit," he said on Tuesday.

The comments came after media reports that a group of more than 30 existing Audi dealers asked the company to respond to their demand that it abandon cooperation with SAIC before December. Otherwise, they said they won't replenish their inventories of Audi vehicles.

Audi couldn't be reached by the Global Times for comment as of press time.

It comes as no surprise that Audi sought an additional partner, since foreign vehicle producers need distribution channels in China, Jia Xinguang, an expert at the China Automobile Dealers Association, told the Global Times on Tuesday.

"For example, Japan-based Toyota?Motor Corp cooperates with China's GAC Group and FAW Group," he said.

"The new arrangement will increase competition among dealers, but it is not a bad thing because it will not lead to a monopoly," Jia said.

An association of Audi dealers wrote to Audi asking how it would balance the interests of dealers from FAW Audi and SAIC Audi, media reports said Monday.

Audi decided to cooperate with SAIC because of the positive outlook for China's luxury car market, yicai.com reported Friday, citing CEO of Volkswagen Group China Jochem Heizmann.

"Audi seeking a new partner will not harm FAW Group Corp at all ... On the contrary, the new cooperation will strengthen the business of FAW," Heizmann said, noting that the two already had a solid 10-year development consensus.

Audi has cooperated with FAW for more than 20 years. Currently, Audi manufactures all its cars in China with FAW Group Corp in Changchun, Northeast China's Jilin Province and Foshan, South China's Guangdong Province.

In the first nine months of 2016, Audi sold 438,300 cars in the Chinese market, up 6.3 percent year-on-year.

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