Audi Denies Having Any Trouble in China

Audi denied being trapped into the sales crisis in China. The company is confident of its performance in the Chinese market.

Audi China was haunted by the decreasing sales in China through February. A “reliable” source said that the sale of Audi A6L, the knockout product of Audi in China, saw great decrease in February.

According to the data, Audi only sold 2919 units of A6L in February, dropping by 65% compared to a month before. People said that Audi faces sales crisis in China.

However Audi denies the sales crisis. “Audi sold 20,000 units in China in March, of which the sale of A6L exceeded 10,000 units. We have recovered from the decrease,” said a director of FAW-Audi, a Sino-German joint venture founded by First Auto Work and Audi.

The director also said that Audi was tortured by insufficient production capacity in China. In order to solve this problem, Audi began to reconstruct its production line in China. The reconstruction was finished in middle March.

The FAW-Audi director pointed out that more individual consumers chose Audi vehicles. This is a different development comparing to the past when a majority of consumers of Audi were government departments and companies.

As a source said, Audi will not localize any new models till 2013. Audi plans to increase the sales of imported vehicles in China. “The amount of Audi cars assembled in China has to be growing at a slower pace. We need more cars from Germany to keep our profile as a high-end brand,” said the source.

Intensive Competition in C-Class Auto Market

An expert in the auto-dealing industry said that A6L was still the most popular Audi vehicle in China. It contributed nearly half of the Audi sales in China. A6L, as well as the BMW 5 series and Mercedes Benz E-Class are the three major auto models in China’s C-Class auto market (in China, the C-Class auto refers to the middle- and high-end auto). The three German auto manufacturers are engaged in an intensive competition in China’s C-Class auto market. The most common way they chose to conquer the market is to localize their products.

BMW is increasing the supply of 5 series in China. In order to assemble more 5 series vehicles, BMW has shut down production of 3 series vehicles, a model inferior to the 5 series, and established more production lines for the 5 series autos.

Last July, Mercedes Benz cancelled importing E-class cars into China for its dealerships except of a dealership in Beijing, which is a Mercedes Benz joint venture. Mercedes Benz set up a new production line in China to produce E-class models. After several expansions of the production line, the production of E-class vehicles made in China can satisfy the local demand.

Audi set up a series of production lines of A6L several years ago. Its localization in China is better than that of Mercedes Benz and BMW. However, the increasing amount of cars made in China makes the Chinese consumers think less of Audi. Therefore, Audi decided to lower the proportion of “made-in-China” vehicles to keep its competitive power.

More Individual Consumers

According to the statistical data from an Audi dealer in Beijing, in the first quarter of 2011, 75% of the consumers bought Audi cars for their personal use. The image of Audi cars as the “exclusive cars of the Chinese government” is gradually gone.

This is partially because the Chinese government is starting to use Mercedes Benz and BMW for its government departments. With two strong competitors, Audi’s share in that field decreased. Meanwhile, Audi attached great importance to the individual consumers in these years, changing the solemn and rigid appearance of its cars into the ones that fit the individual consumers.

Audi entered Chinese market earlier than its two German peers that gave the company the opportunity to build its brand awareness. When it turned to the individual market, its fame is a great weapon to expand its market.

Slow Localization

Localization is the Audi’s strategy to succeed in China. Nowadays, 85% of the Audi cars sold in China are assembled in local plants. Localization reduces the cost and improves the efficiency of the company. However, as said earlier, if more and more Audi cars are assembled in China, Chinese people, especially those who admire foreign brands, do not consider Audi as a complete foreign brand. This will damage the name of Audi in China and will affect the company’s sales.

Therefore, Audi puts forward a plan of increasing the proportion of imported vehicles to 40% in the next three years.

In order to reach this goal, Audi plans to stop localizing models in China by 2013. That implies that no new models of Audi will be manufactured in China. In addition, Audi plans to introduce A1 and A7 into China to increase the number of its C-Class autos.

Although A6L is still the major product of Audi in China, the German automaker has decided to lower its proportion in the future. Audi hopes that A4 and Q5, which were introduced two years ago, as well as A1 and A7, can play more important roles in Audi’s growth in China in the future.

At the beginning of 2011, Audi declared its plan of selling 1 million cars in China in the next three years. If Audi achieves this goal, China will replace Germany as its largest market. The German automaker has earned unmatched success in the world’s most populated country. Now it is looking for a new development opportunity.