German Luxury Brand Audi Will Build Cars at SAIC VW in China

author: Jacky Ho   

Audi has purchased a 1 percent stake in SAIC Volkswagen Automotive, paving the way for the joint venture to build and sell Audi vehicles in China. SAIC Volkswagen was formed in 1984 in Shanghai. It is a joint venture between Germany and China.

The luxury division of Volkswagen paid 115 million yuan ($17.5 million) for the stake on April 10, according to the National Enterprise Credit Information Disclosure System, a Beijing operation that provides free information about Chinese companies to the public. It also tracks shareholding structure changes of businesses incorporated in China.

After Audi's purchase, SAIC VW has been restructured into a 50-48-1-1 partnership between SAIC Motor, Volkswagen Group, Skoda and Audi. Skoda acquired its stake earlier in the joint venture.

Currently, only FAW-Volkswagen Automotive, a 60-30-10 partnership between China FAW Group, VW Group and Audi produces and distributes Audi vehicles.

Audi is looking to open a new production site and a second distribution network in China to fend off competition from German luxury rivals Mercedes-Benz and BMW, which are both looking to open manufacturing facilities in China, the world's largest automotive market.

In November 2016, VW Group and SAIC signed a letter of intent to let SAIC VW produce and market Audi's products. But the move was met with resistance from Audi's dealers in China. To appease the retailers, the document has yet to be signed into a legally binding agreement, according to automotive News Europe.

China is expected to also drive demand in the automotive market, with close to 35 million expected vehicle sales in 2020, according to data gathered by Statista.

In 2017, China produced almost 25 million passenger cars and around four million commercial vehicles.

Audi, which remained the largest luxury brand in China in 2017, was outsold by Mercedes through the first five months of this year: Audi sold 258,413 vehicles, while Mercedes delivered 283,219.

Since entering the Chinese market, Volkswagen Group has taken a leading market position in China. In 2015, together with its two joint ventures – SAIC Volkswagen and FAW-Volkswagen, Volkswagen Group China delivered 3.55 million vehicles to customers in the Chinese mainland and Hong Kong.

Jacky Ho