BEIJING – Audi has decided to temporarily stop negotiations with SAIC Motor on dealer network and sales channels, according to an internal letter sent to China Automobile Dealers Association (CADA) Audi Dealer Association on November 30 by Audi China President Joachim Wedler.
“When the existing dealers have a long-term and stable profit situation and also after alignment with Audi dealers association, Audi AG will further negotiate the cooperation with SAIC regarding dealer network and sales channels. This negotiation among Audi, SAIC and CADA Audi Dealer Association should start no later than end of March 2017. If there is a demand FAW is invited to participate,” said Wedler in the statement that was circulated in Chinese social media.
Audi issued an official statement on December 1 that an understanding has been reached with the dealers regarding future network profitability and management issues and reiterated that the long-term and trustful partnership with dealers is crucial to the success of Audi in China.
The “truce” ends about 20 days of “tangle” between dealers and Audi since the luxury brand signed an MOU with SAIC Motor on November 11 to explore dealer and network expansion, which has irked dealers who threatened to raise prices and stop taking cars from Audi if a satisfactory resolution was not provided by December 1.
It marks a major win for the dealers and perhaps a milestone in OEM dealer relationship development in the industry: the first time talks between a Chinese and a foreign OEM have been halted because of strong influence from dealers.
SAIC Motor Chairman Chen Hong weighed in on the issue later on December 1, telling shareholders at a meeting that its pending tie-up with Audi will go ahead as planned and details of the cooperation will be announced in due course.
Timeline of Audi’s “love triangle” with FAW and SAIC Motor and tangle with dealers:
October 30: Rumors surface that Audi is looking to set up a second JV in China possibly with SAIC Motor;
November 7: Media reports say SAIC Motor Chairman Chen Hong is in Wolfsburg discussing a possible deal with Volkswagen Group to produce and sell Audis in China;
November 11: SAIC Motor, Volkswagen AG, Audi and SAIC-Volkswagen sign strategic framework MOU to produce and sell Audis in China;
November 14: SAIC Motor and Audi issue official statements confirming the deal;
November 21: Audi dealer representatives meet with top Audi executives in Foshan, Guangdong Province seeking resolution; meeting ends abruptly with dealer representatives issuing ultimatum;
November 30: Audi dealers across China reportedly plan major price hike; Dealer representatives meet with senior executives of Audi China and FAW-Volkswagen Audi Sales Division in Beijing; Audi decides to temporarily stop negotiation with SAIC Motor regarding dealer networks and sales channels, according to internal letter from Audi China President Joachim Wedler to dealers;
December 1: Audi issues official statement saying an understanding has been reached with dealers regarding optimization of profitability, network management and consideration of existing dealer interests in future network expansion; SAIC Motor Chairman Chen Hong tells shareholders no major changes expected for its pending tie-up with Audi and cooperation details will be announced in due course.