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Autos

What does 1pc mean? It buys Audi the first step to making cars with China’s biggest automaker

Deal revives a 2016 pact with SAIC that was shelved in the face of opposition from dealers who sell Audi vehicles produced with FAW Group

PUBLISHED : Wednesday, 27 June, 2018, 7:01pm
UPDATED : Tuesday, 03 July, 2018, 8:22pm

Audi – Volkswagen’s premium brand – has taken a crucial step to produce cars in China with a second Chinese partner SAIC Motor by taking a minor stake in SAIC VW, the long-established joint venture between its German parent and the mainland’s largest automaker.

The 1 per cent share acquisition by Audi in the Shanghai-based joint venture paves the way for the bestselling premium brand in China to produce its namesake models with SAIC, a move that will consolidate its leading position in the world’s largest auto market.

It also revives a 2016 pact between Audi and SAIC to produce and sell vehicles in mainland China that was shelved in the face of opposition from dealers for Audi vehicles produced by its first joint venture partner FAW Group. A consensus was then reached after Audi agreed that it would not make cars with SAIC until January 2022.

The shares, transferred to Audi from its parent VW, enables the partners to comply with Chinese rules to make and sell Audi-branded vehicles, SAIC said in a statement.

“The programme between SAIC and Audi is going on according to the planned time frame,” SAIC said.

It did not elaborate on which models the Shanghai-based joint venture will assemble.

China's vehicle ventures

SAIC VW is a 50-50 venture between the Shanghai carmaker and VW.

“Premium passenger car segment remains a bright spot in China’s auto industry and foreign companies are revving up expansions to better tap consumer demand,” said Ding Haifeng, a consultant with Integrity Financial Consulting. “The relaxation of policies will give leading players better chances of chasing higher growth in China.”

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The National Development and Reform Commission announced in April that Beijing would scrap all limitations on companies making fully electric and plug-in hybrid vehicles this year, do the same for commercial vehicle makers in 2020 and lift restrictions on the wider passenger vehicle market by 2022.

Currently, foreign auto companies can produce and sell vehicles in mainland China only through joint ventures with Chinese partners in which they hold no more than 50 per cent.

Premium passenger car segment remains a bright spot in China’s auto industry and foreign companies are revving up expansions to better tap consumer demand
Ding Haifeng, Integrity Financial Consulting

The Audi A7 sedan was reported to be the first model that Audi will produce with SAIC VW.

Audi China president Joachim Wedler said in April that it was seeking to expand the relationship with VW’s oldest domestic partner SAIC amid “intensive discussions”.

In March, Volkswagen China named Fred Schulze, the director of Audi’s C-class and D-class sport-utility vehicles and crossover models, to be SAIC VW’s technical executive vice-president.

The SAIC-Audi project is seen as one of the key driving forces for the German brand’s long-term development in China where it has been the No 1 player for 30 consecutive years.

In 2017, Audi sold 595,300 units in mainland China, up 1.1 per cent from a year earlier.

It reported sales of 154,000 vehicles for the first quarter of this year in China, jumping 42 per cent year on year.

Audi already makes six models in China exclusively with FAW, including the A7 saloon, the Q8 SUV and the e-tron electric sport utility vehicle, in addition to the A8 four-door executive vehicle.

Additional reporting by Maggie Zhang

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