China: Audi going down to prey on mass-market brands image

Audi, the second largest luxury automaker in the world, has a commanding position over the world’s largest auto market – China – but the premium brand has also seen the effects of the recent sales cool down.

Officials of the Volkswagen subsidiary believe the recent sales slowdown could set the stage for lower capacity utilization of its two local assembly facilities, lifting incentive spending on ageing models and shifting the market away from the lucrative, high-margin upper segment models, such as the A6 L. Audi still thinks it’s a brand that has positioned itself well enough to try and lift its overall market share by heading towards the booming segments – which are the smaller-margin providers. Still, the biggest woe is that relying on a deterioration of the sales mix towards cheaper priced models and the rising discounts could make premium brands heavy reliant on volume increases to achieve their forecasted profit margins. During the days of the Consumer Electronics Show Asia in Shanghai earlier this month, executives of the automaker confirmed what BMW officials have already said – China will no longer be the high margin paradise from the past few years.

Unlike traditionally established markets around the world, China had been a market where carmakers were constantly fighting to fulfill demand, with the brands fighting to add new models and eschew production problems at the factories and with suppliers. Audi sales jumped six times in volume since 2007 to about 580,000 units last year, maintaining it as the market’s top seller of premium autos and turning it into Audi’s largest single market – two times bigger than Germany.

Via Automotive News Europe