Can Audi Without the ‘Four Rings’ Win Back the Chinese Market?

On November 7, Audi launched its new electric vehicle (EV) brand AUDI and the AUDI E concept car in Shanghai. The brand, a collaboration between SAIC Group and Audi, will no longer use Audi’s classic four-ring logo. Instead, it will adopt the “AUDI” letters as its brand mark. The official explanation for this change is that it signals a connection to Audi while also distinguishing it as a new entity. The first concept car from this brand, AUDI E, is expected to go into mass production and delivery in 2025. Over the next three years, the project plans to introduce three electric models targeting the B and C segments, aiming to meet diverse market demands.Audi’s official website states: “Audi is preparing for the future of the Chinese market.” The company emphasized that AUDI is tailor-made for China, combining the essence of both Audi’s DNA and China’s innovation. Audi’s CEO, Gernot Döllner, stated: “The automotive industry is undergoing the largest transformation in history. Through our partnership with Chinese firms, we will play a decisive role in this transformation.” Audi recognizes that Chinese high-end customers differ from those in other countries. They are younger, more tech-savvy, and expect advanced autonomous driving features in their vehicles. Audi seeks to combine its expertise in design, vehicle development, and engineering with SAIC’s rapid innovation and technological ecosystem-building capabilities, alongside their understanding of China’s market demands, to launch competitive products in China.On the day before launching its new brand, Audi released its third-quarter financial results. The company reported a revenue of €46.3 billion and an operating profit of €2.1 billion for the first three quarters of 2024, with a net cash flow of €3.8 billion.

However, operating profit fell by 91% to €106 million in Q3. Audi attributed this sharp decline to weak luxury consumption in China and restructuring costs from its Brussels plant. Audi’s CFO, Jurgen Rittersberger, admitted that the company is facing intense price competition, particularly in China. According to recent information from its parent company, Volkswagen, its Q3 operating profit plunged by 42% year-on-year. Europe, a key market, is facing increasing challenges from Asian automakers, especially those from China, with Volkswagen’s market share weakening. This makes the Chinese market particularly important.In Q3 2024, Volkswagen’s sales in China dropped 15% year-on-year. However, electric vehicle (EV) sales bucked the trend and grew by 5.2%. Thus, the Chinese market and the electrification transformation are now the focal points for both Volkswagen and its brands. Given these circumstances, Ralf Brandstätter, Chairman and CEO of Volkswagen China, has set longer-term goals. He said: “Currently, we are focusing more on profits rather than market share, which allows us to allocate more resources for future R&D and innovation. 2026 will be our year of action.” According to the company’s plans, in 2026, not only will Audi’s pure electric models developed with SAIC be launched, but two models co-developed by Volkswagen and Xpeng Motors will also debut in the Chinese market.As reported by Neue Zürcher Zeitung, Ferdinand Dudenhöffer, Director of the Duisburg Automotive Research Center, stated: “Without the expertise of the Chinese, Volkswagen will lose customers in China and, in the next few years, in other parts of the world.” He believes that most of Volkswagen’s engineers in Germany come from traditional internal combustion engine backgrounds, and until recently, Volkswagen’s China business was still mainly managed by the German headquarters, which may no longer be suitable for today’s market.

Experts still believe that Volkswagen has a chance to catch up, but it is inevitable that it will go through a difficult period. Chinese companies have built vertically integrated supply chains from raw materials to batteries, allowing them to continuously release new, low-cost models. Dudenhöffer argued that the push from Hefei, Anhui, could be Volkswagen’s last chance to establish a long-term foothold in China.In recent years, Volkswagen has worked hard to transform Hefei into a center for smart connected car innovation and R&D. It has set up a series of companies in the region to align with the automotive industry’s development trends. In October this year, Volkswagen China decided to lay off employees to reduce costs. The layoffs primarily affected the department responsible for imported cars at the headquarters. According to 21st Century Business Herald, the company offered employees two options: relocate to Hefei or accept a severance package. In the environment of cost-cutting and efficiency improvements, Volkswagen China faces significant challenges in maintaining the stability of its current business while focusing on its Hefei strategy.Moreover, vehicles produced under the Audi-SAIC project will carry Audi’s exterior branding, but the “soul” of the electric cars—the ecosystem construction—will be handled by SAIC. One reality is that as a Chinese partner, SAIC also has its own brands competing in the market. The most advanced technological innovations are likely to be first supplied to brands with closer relationships. Overseas companies may struggle to obtain breakthrough, highly competitive technologies in a timely manner. For traditional internal combustion vehicle brands to succeed in China’s highly competitive market, they must identify and leverage their unique advantages. Audi, beyond its logo, needs to quickly find new answers to this challenge in the new era.