Mar. 22 (NBD) -- Audi AG plans to found a new sales subsidiary in East China's Hangzhou, attempting to integrate its sales network, a source said to NBD.

The two automobile manufacturing giants SAIC Volkswagen Automotive Co., Ltd. ("SVW") and FAW-Volkswagen Automobile Co., Ltd. ("FAW-VW") will purchase stakes in the new company.

The person in charge of Audi China said he didn't know anything about the news. 

Audi has already planned to build a new sales enterprise to manage sales channel since last year.

On 19 May last year, Audi AG, FAW Group, FAW-VW and Audi's dealers reached consensus on the sales dealer issue, agreeing that Audi has only one common sales company in China to manage the dealer network and define the standard of the network, and all current dealers of Audi will be authorized by the company.

Some insiders thought it is impractical to build a unified sales network by collaborating with both FAW-Volkswagen Audi and SAIC Volkswagen Audi.

A person close to Audi China explained that the equity portion of the new enterprise will be crucial to the three parties, but Audi can't find the balance between the stake percentages to be held by SVW and FAW-VW without Chinese government's approval.

Photo/Shetuwang

The game of equity between Audi and FAW-VW lasts for a long time. 

The two sides together with relevant parties signed the memorandum of understanding (MoU) in Geneva on 7 March. According to the MoU, the two new companies FAW Audi Sales Corporation and FAW Audi Mobility Service (China) Co., Ltd. will be jointly founded.

The new MoU may provide opportunities for Audi to seek for more equity.

The newly established FAW Audi Sales Corporation will be a wholly owned subsidiary of FAW-VW, the person in charge of Audi China said in an interview with NBD, adding that in the future, the new corporation can launch the large product plan at the best time with faster decision-making process, to expand the product portfolio and introduce more imported models and locally produced ones.

However, the person didn't demonstrate the ownership structure of the new companies.

The person close to Audi China revealed that Audi will hold 10 percent stake in the new subsidiary which is the same as that in FAW-VW.

With regard to this, an analyst noted that the adjustment of the equity portion should be approved by the State Council and State-owned Assets Supervision and Administration Commission of the State Council. The new cooperation may not change the equity portion but balance the interests of all parties so as to pave the way for the fulfilment of SVW Audi project.

On 11 November 2016, SAIC Motor and Volkswagen Group signed a cooperation agreement in Germany to manufacture and sell products under Audi brand, and sell Audi's imported models, providing related mobility service in China. The two parties will hold 50 percent stake in the new joint venture which aims to introduce the Audi brand to China and offer new energy vehicles, intelligent internet mobility and other services.

This soon irritated domestic dealers of FAW-VW. Later on 30 November, Audi announced the suspension of the cooperation with SAIC Motor to conciliate those dealers.

The shelving SVW Audi project now sees new update. A source close to SAIC Motor indicated that according to the original plan, the SAIC and Audi will set up a sales joint venture and officially manufacture the first model in 2020, a model that will be produced by SVW's current production lines at the initial stage. 

On 13 March this year, Rupert Stadler, Chairman of the Management Board and CEO at Audi AG, said in 2018 Volkswagen annual meeting that Audi's negotiation with SAIC Motor went well under the original conditions and framework. Though Audi has signed the 10-year business plan with FAW, the two-partner strategy will bring the win-win result to Audi, he noted.

Email: zhanglingxiao@nbd.com.cn