Audi Dealers Jittery Over Parent Company’s Tie-Up With SAIC

Audis China dealers have called on German automaker Volkswagen to reveal more details about its new deal with SAIC， fearing the pact could choke their businesses.

The China Securities Regulatory CoSAIC Motor Corp. Ltd.， Chinas largest automaker by sales， announced last week （Nov 14-20） a partnership with Audis parent， Volkswagen AG， to produce and sell Audi vehicles from SAICs Shanghai facility， which already makes Volkswagen-brand cars.

The deal upset FAW Group Corp.， a rival joint venture partner of Volkswagen and the current exclusive manufacturer of all Audi vehicles sold in China. Management at FAW Volkswagen Automobile Co. Ltd.， in the northeastern province of Jilin， were"furious" when they learned about the deal， a source close to FAW.

Its not clear which Audi models will be produced at SAICs Volkswagen plant.

Auto dealers， who have invested millions of yuan to build exclusive dealerships selling models produced by the FAW-affiliated facility， said the new partnership has left them in the lurch.

Car dealers said they will be forced to terminate their agreements with FAW if they want to sell vehicles made by SAIC， but getting a new dealership is expensive.

Dealers said their businesses would suffer if SAIC were to take away some models currently manufactured by the FAW facility or were to set up its own sales channels.

Dealers who want to work with both joint venture partners may have to open up new stores to provide maintenance services and sell parts for different types of Audi models. An industry insider said that it cost 600 million yuan （$87.1 million） to set up an Audi dealership in the southwestern city of Chengdu a few years ago. Although the cost might not be that high now， opening a new store is still risky， he said.

"In recent years， Audis sales growth has slowed down and dealers have suffered losses. But instead of looking for a way to solve this problem together， Audi went to find a new partner，" one dealer said. "As longtime sales partners for Audi in China， were all disappointed."

During an annual dealer meeting in Shanghai last week， Michael-Julius Renz， president of Audis China sales division， did not address the question of how the two joint ventures will split the sales networks. Instead， he tried to comfort dealers by saying SAIC Volkswagen"needs years to catch up."

Upset by Audis reluctance to give more details， dealers banded together last week and turned in a request urging the company to clarify its plans for the SAIC facility.

China， the worlds largest market for Volkswagen， contributed about a third of Audis global revenue last year. Since entering the mainland in the late 1980s， Audi has become Chinas leading luxury car brand， outselling rivals such as BMW and Daimler AGs Mercedes-Benz. But Volkswagen also posted its first drop in sales in China in 2015 amid the economic slowdown and a series of corruption scandals at FAW， prompting Audi to seek new partners.