The China-made Q5 is Audi's latest move in its well-established localization. Provided to China Daily

Previous million-unit target 'now appears conservative'

BEIJING - Encouraged by better-than-expected performance last year in the world's top vehicle market, German luxury carmaker Audi AG, owned by Volkswagen Group, has raised its three-year sales target in China.

"The three-year target now appears conservative because it will be reached as long as we can grow 8 percent annually over the next two years," Zhang Xiaojun, executive deputy general manager of the Audi sales division, said without releasing specific numbers.

"We already have a higher target." he said.

Audi moved 309,888 cars last year on the Chinese mainland, a surge of 37.4 percent from 2010, according to its sales division at FAW Volkswagen Automobile Co.

Its 2011 sales - which included 252,000 locally made cars and 57,888 imported vehicles - ensured Audi retained the crown of top luxury carmaker in China. The figures also enabled the country to outstrip Germany as the brand's No 1 single market in the world.

In October 2010, Audi released a three-year goal of selling a million cars in China from 2011 to 2013, which was widely believed to be very aggressive.

But Zhang noted the goal will be met and "as long as there's no big setbacks in China's macro economy, we will surely be able to achieve the new sales target".

He attributed Audi's success in China largely to its "strong full-value-chain localization" from R&D to parts sourcing, production and sales.

Audi began assembling cars at FAW Volkswagen in the northeastern city of Changchun two decades ago, becoming the world's first luxury brand with production in China. Audi and Volkswagen have a combined stake of 40 percent in the joint venture, with the rest held by FAW Group, one of China's top domestic automakers.

New products

Audi now produces the A6L and A4L sedans, as well as the Q5 SUV, at the joint venture. It also imports a slew of models such as the A8, Q7, A7, A3, TT and R8.

Dominique Boesch, general manager of the Audi sales division, said last week that Audi plans to introduce at least seven new models in China this year such as the new locally made A6L, the imported Q3 compact SUV, the Q5 full hybrid and S/RS high performance cars.

Audi said last month that it will make the A3 compact car in 2013 at a plant under construction in Foshan, Guangdong, part of FAW Volkswagen's new manufacturing facility in the southern province.

Zhang said Audi will also produce the Q3 in Changchun later, but did not give a specific timetable.

"In the future, Audi will take the lead in localization of many leading technologies amid the introduction of new models," Boesch said.

Beginning this year and in 2013, all locally made Audi models in China will be equipped with micro hybrid technologies - start-stop and intelligent thermal management systems, Boesch said.

Audi will also begin local production of hybrid models, he said.

In addition, he said the company will produce aluminum parts for the new A6L this year for the first time in China.

Capacity expansion

Audi last year announced that it will have an annual production capacity of 700,000 cars in China by 2015, up from 300,000 units at present.

Zhang said production at the two plants in Changchun could be further raised through adjustments this year.

The new plant in Guangdong will have an annual production capacity of 150,000 Audi cars when it begins operation. Zhang said the capacity could also increase in the future.

Boesch said the carmaker will aggressively expand its sales network in China to include more than 300 dealerships by the end of this year, up from 237 at the end of 2011.

Zhang said Audi will add 50 to 70 new dealerships in China annually to boost the total number to 600 in the coming years.

"We now have dealerships in 117 first and second-tier cities in China," he said. "We will give more importance to second and third-tier cities, which have more growth potential."

Market outlook

"We have carefully optimistic expectations for the premium car market in 2012," Boesch said.

He predicted that the premium car market in China will grow 15 to 20 percent this year, boosted by the country's stable economic growth and "very large rigid demand" for cars.

China's State Information Center forecasts an even faster pace of growth in the premium car market - an increase of 25 percent in 2012.

The segment soared by almost 40 percent to 950,000 units in 2011.

But Boesch noted some negative factors for the market this year, such as expiration of a phalanx of incentive policies, traffic congestion and purchase restrictions in some cities, rising oil prices and inflation.

At the same time, Audi faces mounting competition from major rivals such as Mercedes-Benz and BMW, which are speeding up introduction of new products in China and building more production capacity.

Infiniti, the premium brand from Nissan, will reportedly start to make cars in China this year or in 2013.

China Daily

(China Daily 01/16/2012 page19)