Audi making milestones in Chinese market

Twenty-five years ago, premium car producer Audi AG signed a technology transfer contract with China's FAW Group to assemble its Audi 100 sedan in the country, a move that has proved to change the country's then fledgling automobile industry..

The 499 units of Audi 100 produced that year was the first batch of locally made premium vehicles in the country when cars were still considered a premium for local people

Today, China is Audi's largest single country market in the world, where the company has shifted gears from "official car" for Chinese governments at various levels, as 85 to 90 percent of its vehicles were delivered to private users.

"The cooperation with FAW should be marked as one of the most successful models in the automobile industry," said Rupert Stadler, chairman and chief executive officer of Audi AG, when he came to China to celebrate the FAW and Audi 25th Partnership Anniversary on Thursday.

"[The] two sides are both satisfied, with no regrets. With this cooperation, we experienced adventure and we gained everything," Stadler said.

Most recently Audi delivered its 2 millionth vehicle - the new A6L - in Foshan, Guangdong province, a record no other premium brand has achieved yet.

The southern city houses the company's second plant in China, where it is going to produce the all new A3 sedan and A3 sportback next year.

"The in-depth integration the both sides achieved in technology, manufacture, management and market know-how has deeply rooted in FAW-VW's whole value chain localization from research and development to production, management and operation, as well as fully helped support FAW's self-development," said Qin Huanming, FAW's deputy general manager.

"That made us confident to have a further cooperation with Audi on renewable energy, new technology, parts sourcing and other fields in the future," he added.

One-million-unit sales

Stadler said "In China, Audi finds its second home town. We achieved the first 1-million-unit sales in 22 years, however, the second 1-million-unit sales only in two years and nine months."

"China has for three consecutive years been our largest market in the world, and helped us become the second biggest premium vehicle brand globally last year," he noted.

During the short period, under its localization strategy, Audi added Q3 into its local production list, enriched its product portfolio in China from 19 to 31 models, increased the localization rate of its vehicles to 65 percent and expanded its distribution network from 167 to 309 dealerships.

"Though I cannot describe a concrete Audi's China Dream for the next 25 years right now, I believe, with our further cooperation with FAW, the local market will greatly help Audi raise its position in global premium vehicle sector, and support our target of being the No 1 luxury car brand in the world in 2020," he said.

In 2012, Audi sold 405,838 vehicles in China, a 30 percent increase from a year earlier, contributing 28 percent of its total global sales.

In the first half of this year, though China's premium vehicle segment halted sharply amidst economic decline, Audi's sales in China still surged 17.5 percent to 226,217 units, being the fastest growing luxury vehicle brands among its competitors.

"We hope our sales in China will continue to grow and support us to have 2 million global annual sales by 2020," Stadler said.

Stadler said now Audi hoped to have a new dealership each week, aiming to sell its vehicles through 700 dealerships around the nation by 2020.

"And my confidence also comes from the huge potential in China's premium vehicle market," Stadler said. "In mature markets, luxury vehicle contributes 15 percent of overall market, while it only occupies no more than 7 percent of Chinese market."

"Though Audi has maintained a dominant leadership here, in where our market share is only 3 percent of total automobile sales, there is still potential for us to go further, as we take 8 percent of market in Germany and 5 percent in other European markets," he added.

Stadler also said that in the next few years, Audi will launch at least three new models every year, to enrich its lineup to Chinese consumers and maintain the leadership in all segments.

From 2014, combined newly-added production of 150,000 units in Foshan and existed capacity in Changchun facility, Audi's annual output is projected to reach 700,000 units in China.

"The cooperation regarding technology will be another significance," said Ulrich Hackenberg, board member of Audi AG who is responsible for the technology development.

R&D center

This February, Audi inaugurated its Asia research and development center in Beijing, "where we focus to develop drivetrain and e-mobility systems as well as technology cooperation with local suppliers, for China market and surrounding Asian markets", Hackenberg said.

"The center helps us provide more latest technology to the China market and benefit Chinese consumers," he said.

He also said that Audi will partner with FAW-VW to develop plug-in hybrid models for the China market over the next years, which he believed a feasible solution in the current situation.

"The pure electric vehicle is future, for sure, as well as fuel cell technology. However, there are still obstacles in battery capacity and infrastructure for hydrogen transport, storage, as well as safe and convenient usage," Hackenberg said.

"We have all these new technologies' development ongoing and ready to provide them when the market is well prepared. For example, we will go for pure electric vehicle if the next generation of battery can provide a drive range of more than 300 kilometers," he said.

For the current volume vehicles with traditional combustion engine drivetrain, Audi is also making efforts to develop further energy-efficient engines, which will be put into production in Changchun in the near future.

Combined with Audi's other advanced technologies, the fuel consumption of the next generation of its flagship model will be lowered by 18 percent.

"Audi will not only take the production of green, smart and perfect vehicles into serious consideration, but also shoulder more social responsibility and play an important role for a healthy development of China's automobile industry," said Zhang Pijie, general manager of FAW-VW.

"And we are confident that we can reach the third 1-million-unit sales in shorter time and keep our dominance in China's premium vehicle segment," Zhang said.