Audi dealers in China are demanding 28 billion yuan (US$4 billion) to cover losses over the past three years that they blame on the automaker adding too many distributors, potentially worsening a sales decline that saw BMW AG and Mercedes-Benz overtake the luxury brand last month.
The dealers met on Thursday in Sanya, China, and issued a statement saying their newly formed group would oppose Audi’s planned formation of a second joint venture in China until the German automaker managed to reach 1 million in annual sales in the nation.
Audi sold a little more than half that many units in China, including Hong Kong, last year.
“We are clarifying the allegations” of losses between 2014 and last year, Audi China spokeswoman Johanna Barth said by telephone on Thursday. “To our knowledge, the overall business of Audi in China was profitable in those three years.”
Song Tao (宋濤), a representative for the group of dealers, said they are working closely with the automaker to achieve “mutual benefits,” declining to specify what action they would take if their demands are not met.
Once a highly lucrative trade, profits from automobile distribution have slid as automakers expanded their sales network and car ownership became widespread in major Chinese cities.
Dealers in China are also over-reliant on the sale of new cars, whereas used-car sales and servicing make up the bulk of a dealer’s income in the US.
Besides Audi, distributors for Kia Motors Corp, BMW and Toyota Motor Corp have also demanded financial assistance from automakers in the past two years.
Volkswagen AG, the parent of Audi, has sought to revive growth by adding another sales network through a second joint-venture partner. That plan ran into a wall of opposition from existing Audi dealers, who briefly threatened to stop sales before the automaker agreed to discuss the payment of subsidies.
In its statement, the Audi dealers said that back in 2012 the automaker had targeted 1 million in sales by 2020 on a network of 580 outlets. However, there are now 530 outlets, even though deliveries failed to break through a “bottleneck” in the past three years of about a half million units.
Audi should come up with a “suitable solution” based on the target and the excess number of distributors, the group said.
Audi delivered 591,554 units in China including Hong Kong last year, an increase of 3.6 percent.
The automaker is seeking clarification, as it did not set a target of 1 million sales units by 2020 in China, Barth said.
After entering the nation in the late 1980s with China FAW Group Corp (第一汽車) and building an early lead, Audi sales rose and the marque became the quasi-official ride of high-ranking government officials and privileged businesspeople.
The luxury marque recorded its first annual sales drop in China in more than a quarter of a century in 2015. Near its peak, about 2000, the German brand accounted for about 70 percent of government and state-owned company fleets in China.
Audi lost its leadership in China’s premium car segment last month as deliveries fell 35 percent to 35,181 units.
Sales of Daimler AG’s Mercedes-Benz and BMW both surpassed Audi as they increased 39 percent and 18 percent to 59,000 units and 51,000 units respectively.