How China dealer association resolved Audi's dealer crisis

Yang Jian is managing editor of Automotive News China.Yang Jian is managing editor of Automotive News China.
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China's industry associations are a sleepy lot. Created to advise government agencies, they often act more like bureaucrats than as advocates for members.

But the China Automobile Dealers Association has busted the mold. This month, the group successfully mediated a dispute between Audi and its dealers that threatened to blow up into all-out war.

The standoff started four months ago. Audi is anxious to fend off rival brands BMW and Mercedes-Benz, which were steadily gaining market share.

So, Volkswagen's luxury brand signed a tentative deal on Nov. 11 to allow VW's joint venture with SAIC Motor Corp. to assemble vehicles and sell them through a new dealership network.

The move triggered an uproar from Audi dealers, who are affiliated with Volkswagen's partnership with China FAW Group Corp. They fear that a second dealer network will siphon away sales, so they took drastic action: They stopped ordering new vehicles.

Audi's China sales plunged 24 percent to 67,336 vehicles in January and February, and China's perennial No. 1 luxury brand was outsold by BMW and Mercedes.

Yet, Audi stubbornly refused to back down. During a press conference in Germany last week, company executives insisted that they need to partner with SAIC.

In response, Audi dealers said their feelings had been badly hurt by the irresponsible remarks of executives in Germany.

To an outsider, it looked as if the two sides were hopelessly deadlocked. Then they made peace. Chinese media reported this week that Audi and its dealers negotiated a compromise in Beijing.

Audi agreed to suspend plans for the distribution network with SAIC-VW. In turn, the dealers pledged to allow the partnership to sell Audi cars after the brand's annual China sales top 900,000 vehicles.

Who brokered the deal? It was CADA. According to the dealers' website, the association intervened just four days after the dispute broke out.

Since then, CADA has held 10 meetings with Audi dealers. And in February, it created a new organization for dealers to promote discussions with Audi.

Two key players were CADA Chairman Shen Jinjun and Deputy Secretary General Song Tao. They often participated in the meetings, and they invited Audi's German executives to join the sessions and negotiate with the dealers' representatives.

Their efforts finally paid off. China's worst dispute between a global automaker and its Chinese dealers is ending, and now the two parties can figure out how to revive the sagging brand.

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