Audi AG is providing 1.2 billion yuan (US$193 million) in financial aid to its dealers in China as demand for luxury vehicles slows in its largest market, according to people with knowledge of the matter.
The money will be paid out soon to distributors of the brand in China, according to two people familiar with the plan, who asked not to be named as the information is not public.
The automaker also lowered its sales target for this year from 600,000 units to about last year’s level, the people said. It delivered 578,932 vehicles in China including Hong Kong last year.
“In an increasingly competitive market environment, Audi puts a strong focus on a financially healthy dealer network, guaranteed service quality and stable prices,” Audi China said in an e-mailed response, without confirming the subsidy or cut in sales target. “We steer the market in close alignment with our dealers.”
Audi’s subsidies follow that of Volkswagen AG, which agreed to give financial aid to some of its Chinese dealers earlier this month as vehicle demand slowed with the economy amid stock-market volatility.
BMW AG and Toyota Motor Corp also agreed to give their dealers aid to help cover losses earlier this year.
Dealers are banding together to demand lower sales targets and a bigger share of profits from automakers as demand wanes.
“The days of dealers having to beg the automakers for cars to sell are over,” said Lin Huaibin, a Shanghai-based analyst at IHS Automotive. “Probably other premium automakers will follow suit in the coming months and offer subsidies as well.”
Volkswagen offered dealers of its namesake brand 1 billion yuan, according to people familiar with the plan. It also cut prices on some of its vehicles and offered incentives to buyers.
Toyota, which missed its sales target last year, gave its dealers 1.24 billion yuan this year, to help them meet the costs resulting from excess inventory, the China Automobile Dealers Association said.
Renault SA’s China joint venture also said in January the company will offer its dealers more rebates and help improve their profitability, without providing details.
BMW agreed to pay its dealers 5.1 billion yuan to help cover losses after retailers stopped ordering cars from them, according to the association.
Audi’s China sales fell in May and last month, dragging down first-half delivery growth to 1.9 percent. Despite the decline, Audi remains China’s best-selling luxury carmaker, ahead of BMW and Mercedes-Benz.
Separately, Volkswagen AG, which counts China as its largest market, posted the first decline in first-half deliveries there in a decade as demand slowed with the economy.
VW’s deliveries in China and Hong Kong fell 3.9 percent from a year earlier to 1.74 million units in the January to June period, the company said in a statement. First-half sales in China last fell in 2005, when deliveries slumped 14 percent.
Auto sales have slowed this year in China after economic growth moderated, more cities capped the number of new cars and a volatile stock market diverted funds from vehicle purchases.
“VW has about 20 percent market share, so their weakness is a symptom of broader market weakness,” said Robin Zhu, Hong Kong-based analyst at Sanford C. Bernstein & Co. “VW has problems of its own, the brand in particular is a very sedan- centric fleet in an environment where there is this big switch to sport utility vehicles.”
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