Audi sale suffering in China...because of their dealers

[Tragic Bronson]

http://www.autonews.com/article/201...-relations-wreaked-havoc-on-audis-china-sales

How sour dealer relations wreaked havoc on Audi's China sales

Audi cut itself a sorry figure in China's luxury car market last month.

As Audi deliveries fell 35 percent in January, China's leading luxury brand was finally overtaken by rivals Mercedes-Benz and BMW.

It was an especially poor performance in a month when second-tier luxury brands such as Cadillac and Volvo enjoyed robust sales.

Audi attributed the plunge to its dealers, but it has only itself to blame.

The collapse was the result of hasty steps Audi took last year to set up a distribution channel with SAIC Motor Corp. The decision produced a huge backlash among dealers affiliated with Audi's partnership with China FAW Group Corp.

It's a humiliating turn of events for a brand that virtually created China's luxury car market.

In 1995, Volkswagen's joint venture with FAW began producing Audi cars to avoid China's 25 percent tariff on imports. Audi got another boost when government officials developed a taste for the stretched A6 sedan.

Over the next two decades, Audi was by far China's most popular luxury brand. But Audi's fortunes began to sour in 2013 when President Xi Jinping launched an anti-corruption campaign.

Audi's fleet sales went soft as bureaucrats canceled their limousine purchases. To make things worse, Audi was slow to upgrade its product lineup.

Mercedes took advantage. In 2013, the company fixed its inefficient distribution system and began introducing a new generation of crossovers. Sales soared.

Under pressure, Audi committed two big blunders last year. First, it dumped excessive vehicle inventories on its dealerships, and most of them lost money.

Second, Audi signed a tentative agreement with SAIC in November to establish a second dealership network. Shocked by the news, Audi dealers published an open letter warning that a new distribution channel would "inevitably" harm them.

Audi executives held talks with dealers at the Guangzhou auto show, but the meeting failed to appease angry retailers. According to Chinese media, the dealers subsequently warned that they would stop ordering vehicles from Audi.

Apparently, a large number of the dealers, if not all of them, have carried out that threat. In a statement released Wednesday, Audi blamed its sales slump in China on local dealers who "had planned a restrained business volume at the start of the year."

This month, Audi held a new round of talks with its dealers in a bid to repair relations. But Audi refused to give dealers what they want most: a promise to shelve plans for a second distribution network.

This impasse bodes ill for Audi's future. Unless it can quickly mend ties with its Chinese dealers, the German brand will continue to bleed market share.

Opportunity for Lexus as well?

 

[IS-SV]

The top selling Buicks sold in China are not upmarket or premium cars. BMW, Mercedes, Audi are the popular premium brands there too.

 

[mmcartalk]

Opportunity for Lexus as well?

That may depend, at least in part, on how successful the second SAIC distribution system is for Audi...that system might (?) make up for what Audi is currently losing from the order-cutback from the dealers.

As far as the Audi dealers complaining about the addition of the SAIC system, that's probably to be expected. After all, nobody likes to have actually have competition after they once had a system all to themselves.....(by "system", in this case, I mean the business of selling Audis, not Audi vs. other brands). Now, with a second distribution network competing with them, Audi dealers, to keep selling vehicles, might just have to cut their prices a little. That's just the realities of the buisness world.


And, yes, as you suggest, this might (?) indeed be an opportunity for Lexus....unless they pull an SAIC of their own LOL. :yum

 

[mmcartalk]

The top selling Buicks sold in China are not upmarket or premium cars. BMW, Mercedes, Audi are the popular premium brands there too.

Out of courtesy, Steve, just so that you aren't caught unawares, I want to tell you I deleted my previous post about Buick and Audi in China that your post above replied to. After re-reading Bronson's original article more closely, the article appears to not mean what I thought it did at first.