Audi, FAW ink deals to rev up China presence

Automakers sign more companies to exploit business opportunities

German carmaker Audi AG has inked deals to create two new companies with its existing Chinese partner FAW Group to better tap into business opportunities in China, the world's largest car market.

One will be a sales company and the other will specialize in new mobility and digital services, according to memorandums of understanding signed last week in Geneva, Switzerland.

Audi said the moves are essential in the 10-year business plan it developed with FAW last year.

The two new companies, whose registered capital remains unknown, are expected to start operations later this year.

The sales company will be set up as a wholly-owned subsidiary of FAW-Volkswagen, which manufactures Audi cars in China. Currently, a sales division under the joint venture sells them through a nationwide network.

The functions of the Audi sales division will be integrated into the new company as it launches operations, said Audi in a statement.

"With the establishment of the new independent FAW-Audi sales company, we can launch our large product initiative in the coming years under optimal conditions with faster decision-making processes," said Audi China President Joachim Wedler.

The move is expected to boost Audi's development in China and better meet the demand of Chinese customers, as the German carmaker and its partner FAW-Volkswagen will continue to expand their portfolio in the country, with both imported and locally produced models.

Audi plans to launch 16 new models, including the A8L and the new generation Q5L, into the Chinese market this year.

The number of new energy models in the company's portfolio is also set to increase. In the next five years, at least four purely electric models will be produced in China, according to Audi.

The German carmaker unveiled its first electric prototype, the e-tron SUV, during the ongoing Geneva Motor Show in Switzerland, with a production version expected to hit the European market this year.

Rupert Stadler, chairman of Audi AG, said: "In 2020 we will have three all-electric vehicles in our product range. We will be launching more than 20 electric cars and plug-in hybrids by 2025, spread across all segments and concepts."

The second company, which is dedicated to new mobility and digital services, is designed to offer personalized mobility to the Chinese customers. Shareholders have not made public the ratio of their equities in the joint venture.

Among other projects, the new mobility company will take over premium mobility service Audi on demand+, which launched in Beijing in September last year.

Audi said the new company will enable it to respond to Chinese customer requests with even more agility and offer new digitization concepts, as China is taking a pioneering role in this area.

Analysts said the two new companies are signs of consolidated relations between FAW and Audi and will help promote the German brand's long-term development in China.

In 2017, Audi sold 595,288 cars in China, which made it the best-selling premium car brand in the country for 30 years in a row.

The sales momentum is even stronger this year. In January, it delivered 60,688 cars, up 73 percent year-on-year.

Despite the week-long Spring Festival, Audi sold nearly 40,000 cars in February, up 22.6 percent on the same period in 2017.

Confident in China's premium car segment, FAW and Audi are increasing their investment in FAW-Volkswagen to expand its capacity and product lineup.

According to the carmaker, its Q plant in Changchun, Jilin province, and the second phase of its Foshan plant in Guangdong province will start operation this year.

By 2020, FAW-Volkswagen will introduce five Audi-branded new energy car models and by 2022 all Audi models it produces will be internet-connected.