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Audi has lost its way, and nowhere is the problem bigger than in China.<\/p>\n
The Volkswagen AG brand is heading for its third straight year of declines in the country after falling behind on design and technology. Once accounting for about 70% of cars used by Chinese bureaucrats, Audi risks getting outsold by Xiaomi Corp, a Chinese phone maker that started selling cars only two years ago. Even the showpiece SUV Audi will unveil at the Beijing auto show this week relies on technology from local partners \u2013 a marked pivot for a company built on German engineering leadership.<\/p>\n
\u201cWe underestimated the complexity of the shift to the software-defined vehicle,\u201d Audi Chief Executive Officer Gernot D\u00f6llner said in an interview. The carmaker also misjudged the pace at which Chinese rivals innovated during the pandemic, he added.<\/p>\n
Audi\u2019s decline is emblematic of the existential crisis foreign brands face in the world\u2019s largest car market, where consumers are shifting to local manufacturers led by BYD Co. and Geely Automobile Holdings Ltd. Its slump, coupled with similar issues at sister brand Porsche AG, is eroding profitability at parent Volkswagen and putting pressure on group CEO Oliver Blume.<\/p>\n
Both nameplates are also grappling with waning sales and higher costs in the lucrative US market, where they lack factories to sidestep President Donald Trump\u2019s import tariffs. While Audi\u2019s deliveries in Europe are holding up, it\u2019s getting squeezed by high costs and Chinese rivals expanding in the region.<\/p>\n
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Chinese brands gain ground as affordability drives strongest car sales in a decade<\/p>\n
Getting back on track won\u2019t be easy. China is pivoting to electrified vehicles at a pace Western manufacturers are struggling to follow. BMW AG and Mercedes-Benz Group AG have also reported steep sales declines in the country, with local carmakers increasingly pushing into the premium segment that foreign brands long dominated.<\/p>\n
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What Audi struggles with more than some of its peers is a backlog in innovation, particularly on software and in-car technology \u2013 key differentiators with younger buyers. Its driver-assistance functions have lagged behind those of Chinese competitors, mobile-phone integration can be less seamless, and localised features such as voice controls have been slower to roll out. BMW, meanwhile, plowed \u20ac10 billion into next-generation EVs, including a China-specific SUV it\u2019s unwrapping at the Beijing show.<\/p>\n<\/p>\n
For Audi, it\u2019s a spectacular comedown. At the show\u2019s instalment 16 years ago, it staged a triumph with its new A8. The long, gleaming sedan went on to win awards and helped cement the company\u2019s position as the country\u2019s leading premium carmaker.<\/p>\n
But what followed was a series of setbacks, starting with the diesel scandal in 2015 that ensnared Audi executives and led to years of management churn. The brand has had four CEOs\u00a0and six R&D chiefs in the decade since, sowing uncertainty at a time when rivals executed against clearer plans. Model cycles slipped, software faltered and cost-cutting eroded the fit and finish that once set the brand apart.<\/p>\n
\u201cThere\u2019s been a revolving door of C-suite appointments, and that\u2019s been quite damaging,\u201d Jefferies analyst Philippe Houchois said. \u201cI don\u2019t think I\u2019ve seen much innovation out of Audi in the last five years.\u201d<\/p>\n
The pain extends to other regions. In the US, Audi\u2019s first-quarter deliveries slumped 30% \u2013 the steepest drop among German luxury-car makers. While BMW and Mercedes operate factories in the country, allowing most of their SUVs to sidestep Trump\u2019s duties, Audi imports all of its models there. It\u2019s repeatedly delayed a decision on setting up local production.<\/p>\n
To better compete in the US, Audi will introduce the Q9 later this year, its biggest SUV aimed at winning share from models like the Mercedes GLS and the Cadillac Escalade. It\u2019s also updating the slightly smaller Q7 and will be getting access to a new vehicle platform, its parent is developing with Rivian Automotive Inc., though the first Audi using it won\u2019t arrive until 2028 at the earliest.<\/p>\n
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In China, Audi is launching several new cars tailored to local tastes. The strategy includes partnerships with domestic automakers and tech companies, as well as a China-only sub-brand meant to refresh its image. Its latest concept car impressed with a newfound clarity in design.<\/p>\n
The Audi Concept C at the IAA Mobility 2025 expo in Munich in September. Photographer: Krisztian Bocsi\/Bloomberg<\/p>\n
The main selling point \u201cis a clear differentiation built on Audi\u2019s core strengths \u2013 design, quality, interior, driving dynamics, and safety \u2013 combined with Chinese software and a local digital ecosystem,\u201d D\u00f6llner said.<\/p>\n
Its new sub-brand for China \u2013 named A-U-D-I, in all caps \u2013 is built around a technology partnership with state-owned SAIC. The venture will fully focus on Chinese customer and regulatory requirements, said Fermin Soneira, who leads a cooperation project between both companies. At the Beijing show, Audi will unwrap the second model of that line, the fully electric E7X sport utility vehicle, with a third car due next year.<\/p>\n
Sales of the brand\u2019s debut E5 Sportback sedan have been underwhelming despite the EV garnering critical acclaim. The Chinese market remains \u201cvery challenging,\u201d Soneira told reporters in Beijing last week, cautioning that building the brand will take time.\u00a0On Friday, Audi\u00a0and SAIC unveiled plans for a\u00a0joint design office in Shanghai, with a goal to develop models with\u00a0AI-powered cabins and advanced driver-assistance systems.<\/p>\n
Audi built its reputation on engineering firsts \u2013 from quattro all-wheel drive to lightweight construction and endurance racing dominance at Le Mans.\u00a0Models like the TT and R8 combined design flair with technical credibility, giving Audi a distinct identity claiming \u201cVorsprung\u00a0durch Technik,\u201d which roughly translates to progress through technology.\u00a0In China, it helped create the premium car market.<\/p>\n
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At its peak during the 2010s, that translated into financial firepower. Global annual deliveries climbed to nearly 2 million vehicles, and Audi became one of Volkswagen\u2019s most important profit sources, helping to underpin the group\u2019s global ambitions.<\/p>\n
But sales have since declined to 1.6 million last year, and profitability slipped. Some Audi dealerships in China have shuttered abruptly in the past months, leaving customers out of pocket on prepaid service fees. Others are depending on manufacturer support as cars are sold at little or no profit.<\/p>\n
For D\u00f6llner, the task is to accelerate development and sharpen Audi\u2019s positioning in a market where competitors continue to cut prices and roll out new technology at speed. The automaker will raise the bar on design and quality,\u00a0the CEO said.<\/p>\n<\/p>\n
The new A6L e-tron \u2013 the electric version of Audi\u2019s quintessential premium sedan for the Chinese market \u2013 signals a reset. Launched this month, the car is equipped with dozens of sensors and driver-assistance software from Huawei, a leap forward from the basic cruise control of older German models.<\/p>\n
\u201cThe US and China are driving global megatrends, while Germany and Europe have fallen behind,\u201d D\u00f6llner said at Audi\u2019s annual earnings press conference in March. \u201cThat\u2019s why innovation for our customers must once again become our top priority.\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#Audis #future #hinges #winning #China<\/p>\n","protected":false},"excerpt":{"rendered":"
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