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Negotiation Will Be Tough for the New Audi Sales Company

Date:06-01 15:15 Authour:He Lun

——Dr. Voggenreiter Talking about the Future of the New Company


I can’t remember how many times I have interviewed Dr. Voggenreiter, Member of the Board of Management of AUDI AG for Sales and Marketing, but I do remember that even though he has been working in China for 9 years, all of the previous interviews were conducted at the annual Audi news conferences at Audi AG Headquarters in Ingolstadt. Does this seem strange? That’s because few people know that FAW-VW Audi Sales Division took over Audi China’s import car and brand building business 11 years ago when it was established. Since then, Audi has communicated with the media in China through only one channel - FAW-VW Audi Sales Division.  

Because of this, during the six-month SAIC-Audi dispute, the Audi Dealers Association was always the first with any breaking news through us media or their official website, and the mainstream media followed up, while Audi AG only talked about the matter officially in one special interview with Chinese media at the annual Audi news conference in Ingolstadt, where the Chinese media were all organized by FAW-VW Audi Sales Division. In addition to this, Volkswagen China issued a press release on its official website on behalf of Audi, and Matthias Müller, CEO of Volkswagen AG, and Jochem Heizmann, CEO of Volkswagen Group China, also answered related questions in interviews with Chinese media.

However, on May 19th, Dr. Voggenreiter for the first time gave an interview to Chinese media -including myself - in Beijing after the Audi Dealers Association, China FAW Group, FAW-VW and Audi jointly signed a multilateral agreement on establishing a new sales company and implementing new commercial policies. This time, the inviter was neither FAW-VW Audi Sales Division nor Audi China, but rather Volkswagen China, which was quite unusual. So this interview form may not be a “violation”, but it should be interesting enough.

Of course, what matters most is what Dr. Voggenreiter said about the SAIC-Audi issue, because that is going to be the most debatable topic in China’s luxury car market for a very long time to come.

Negotiation Will Be Tough for the New Audi Sales Company

The sales target is not necessarily the prerequisite for the launch of the SAIC-Audi negotiation

Dr. Voggenreiter: Regarding the content of the agreement, we have already talked about it with SAIC. We have been in regular communication with SAIC.

In the Sanya Declaration, the dealers demanded that negotiations on the SAIC-Audi Project should be suspended until they met the sales target of 1 million vehicles a year. But now through our agreement, we have canceled the connection between these two; in other words, we (the Audi Dealers Association, China FAW Group, FAW-VW and Audi) will strive to meet the sales target (0.9 million in 2022), but the launch of the SAIC-Audi project (in January 2022) is a separate thing.  

The new sales company cannot violate the antitrust law

Dr. Voggenreiter: Establishing a unified company is necessary. First of all, it can speak to the outside with one voice. For example, in terms of brand promotion, one company is better than two, because one can integrate all resources; second, in terms of dealership management, a unified company can adopt consistent standards and use a unified platform. As for how many levels there should be in the company structure, and what functions and roles each level will perform, we will discuss these issues in detail in the next few weeks or months. But anyhow, for Audi, the ultimate goal is to have consistent management standards for dealers.

Of course, the prerequisite to establishing this company is that it must not violate the antitrust law, because it involves the cooperation of two major OEMs, where there are risks of price collusion and horizontal monopoly. For us, the most important thing is to do everything within the legal framework, so we will continue to discuss what we should do to avoid any legal problems. 

Three sales organizations will perform separate duties and be managed by one sales company

Dr. Voggenreiter: Both FAW and SAIC will participate in the proposed sales company. Under this new company, there will be three sales organizations: FAW-VW Audi Sales Company, SAIC-Audi Sales Company and the sales company of Audi China. They are each responsible for issuing the invoices for their own products and tax filing, and Audi China is responsible for importing cars.  

If you ask how these three independent organizations will coordinate and work with each other and manage dealers, my answer is that Audi will probably set up a unified sales company above these three, which will be Audi’s only interface with all of its dealers. This is what Audi is currently planning.

We will be ready to make any adaptation

Dr. Voggenreiter: We aligned on one prerequisite (before reaching the agreement), that is, we should do everything within the legal framework. In addition, when establishing a new sales company, we will definitely check every problem at our own pace. But if there is anything we cannot handle, prompting us to find a better solution, we will be ready to make any adaptation.

In fact, we will definitely spend quite a long time handling this issue. Now we have only completed the first step – opening the gates for the negotiation. Next, the three parties involved will sit down and talk. There will be all kinds of issues encountered in the process, but we have taken them all into account.

The new company will balance the interests of each party

Dr. Voggenreiter: The shareholding (of each party in the new company), will need further discussion, but Audi is ready for it now. Whichever party dominates the company, it will be tough for the other one. In order to balance the relationship between the two companies, as the owner of the Audi brand, we will manage the two companies from Audi’s perspective. Of course, this negotiation process is going to be long and challenging.

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