Could trouble just be around the corner for Audi China?

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Audi has had a comfortable lead over its closest competitors for the past few years, but are they losing their comfortable edge over their competitors? Audi entered the Chinese market relatively early when compared to other Western manufacturers, and considerably earlier than its Germanic rivals at BMW and Mercedes, Audi signed with FAW in 1988, BMW signed with Brilliance Auto in 2003 and Mercedes came to the party considerably later when it signed with Beijing Auto in 2005. Audi had a 15 year head start in the Chinese market compared to BMW and a 17 year head start on Mercedes, during that time they got to know the market, they got to know the consumer, and they had considerable time to build a brand. Audi’s first wave of customers were government ministers at all levels that wanted to cruise in comfort in Audi 100’s and 200’s, these morphed in to the Audi A6 then the A6L, the A4 was introduced and then the A4L and then we had the Audi we know today.

Audi’s 2010 sales reached 227,000 vehicles in China, BMW’s sales reached 168,998 units, Mercedes lagged behind with 147,670 units sold,  2011 sales goals seem to be basically average 20% for the three companies, but could these companies erode Audi’s market share?

Last week we reported on a Business Week article that said Audi’s were no longer sexy enough for Chinese consumers and that Chinese consumers potentially saw Audi’s as being bland government cars. Mercedes and BMW on the other hand are making lifestyle vehicles that help a consumer promote their personal wealth into their cars, BMW are going to be playing catch up with the Audi A4L by introducing a lengthened wheelbase 3-series, Mercedes however have so far been quiet on stretching the miniscule C-Class for Chinese consumers. Mercedes seem to be more focused on the lifestyle aspect rather than promoting business use, Mercedes will likely put their A and B Class range of cars into production in China as well as the GLK SUV. Looking over production figures it seems that BMW and Mercedes are planning to play catch up in that area as well, Mercedes are aiming for a production capacity of 300,000 units by 2015 at Beijing-Benz, BMW are looking to boost their current production from a mere 41,000 units to 100,000 in 2012 and then to 300,000 units in the near future. Audi aren’t sitting idly by however, as part of the VAG empire, they will see production at FAW-VW grow from 660,000 vehicles to over 1 million vehicles in the near future.

Bavarian brands maybe planning for infighting, but looking at the non Germanic brands and you can see some good competition: Volvo maybe ready to rock China’s socks in the coming years. Volvo’s sales maybe miniscule at 30,000 units per year, but their product line up for China is not exactly the most exciting with production being carried out by Chang’an-Volvo and limited to just the S40 and S80L when Geely get involved in production we can expect the full line up to be introduced in to China as locally made vehicles which will lower the prices considerably. Furthermore, as a ‘Chinese brand’ we may see more government ministries and departments rush to support Volvo with procurement orders, thus taking away sales from Audi. Another dark horse on the horizon is Jaguar, Jaguar Land Rover have long been rumoured to be entering in to the Chinese market with a joint venture with Chery, if the XF was made locally we might see some A4 or A6 consumers make the jump to Jag.

The biggest long term threat to Audi’s dominance is not going to be any of its closest rivals, but that of a changing consumer base. Their current Chinese made range is too business orientated, but a growing consumer class are wanting sexier, more defining vehicles and this is something that all of Audi’s competitors have in production now, or will do very shortly. Audi needs to move fast if it is to keep the status quo.