Audi Reaches Out to China's Younger Car Buyers

No Longer the Limo of Government Officials, Auto Maker Tries Harder With Cuter Vehicles

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When Audi entered China in 1998, it quickly earned a reputation as the maker of the limo favored by bureaucrats and party functionaries.

Audi: Rally 15
Audi: Rally 15

At one point, government agencies accounted for one-third of all "stretched" Audi A6 sedans sold in China. If you passed by a government building in Beijing or Shanghai, you'd see rows of identical black Audis parked outside.

But now Audi is working hard to erase that image as it reaches out to young, affluent car buyers. And apparently China's largest luxury brand has made some progress.

When I leave Shanghai to celebrate the Lunar New Year with my relatives in east China's Jiangsu province, I'm often surprised by the mix of cars that I see on the streets.

It happened again last week, when I was amazed to see my cousin's 20-year-old daughter driving a white Audi A3. For the past two years, she has worked as a junior accountant for a local electronics company. She bought the car for 230,000 yuan ($35,240) with her own money and part of her parents' savings.

She is the first among my relatives to drive a luxury car. Asked why she chose the Audi A3, she told me the hatchback looked cute and is not too expensive. She is exactly the kind of customer that Audi wants to appeal to as China's luxury market goes through big changes.

In 2014, Chinese President Xi Jinping cracked down on corruption and extravagance among government officials. Mr. Xi effectively banned government agencies from procuring any new Audi models, let alone the stretched A6 limo with its 383,000 yuan price tag. Across the street from my home in Shanghai is a school run by the local branch of the Chinese Communist Party. Two years ago, each time the school called a meeting, local party officials showed up in Audi A6 limos. But now they take shuttle buses to the school.

Audi sales in China have suffered accordingly.

In 2015, Audi delivered about 580,000 vehicles in China, down 1.4% from a year earlier. The Audi A6 was responsible for much of that decline, as the sedan's sales dropped 11% to fewer than 150,000 vehicles.

But Mr. Xi's anti-corruption drive tells only part of the story. The other factor hurting Audi's China sales is its weak attraction for young car buyers.

Audi's offerings in China have long been predominantly boxy black sedans. While catering to the taste of government officials and middle-aged business executives, they failed to stir any interest among young consumers. Over the past couple of years, many Generation Y members have replaced their parents as the car market's main shoppers. In China, the average car buyer is about 35 years old.

So Audi finally has started to change. In 2014, it began local production of the A3, the model most likely to appeal to young buyers. Sure enough, Audi sold more than 64,350 A3s in China last year, nearly doubling its sales.

Audi also has introduced a palette of bright and lively colors -- including white, red and green -- for its entire model lineup. Such measures have helped Audi to diversify its customer base. Currently, 32% of Augi purchasers in China are young people. Moreover, women account for 37% of Audi sales -- a big change from past years, when most buyers were men.

The company hopes to build on the A3's success this year, when it introduces the A1 Sportback into China to court young buyers. But if it wants to defend its status as China's top luxury brand, Audi will have to move faster to transform itself. Audi's two main rivals -- BMW and Mercedes-Benz -- have developed a huge following among young Chinese consumers who like their cute-looking vehicles. Last year, BMW's China deliveries rose 2% to 463,736 vehicles, while Mercedes' sales soared 33% to 373,459.

Audi's rivals are breathing down its neck. The pressure is building.

Yang Jian is managing editor of Automotive News China.

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