Audi Expands SAIC Partnership to Boost China Models

Volkswagen Group’s premium brand Audi is expanding its partnership with SAIC Motor to jointly develop future vehicle models under their co-owned, China-focused brand. The move comes as the automaker seeks to stabilize performance in its largest market amid declining sales and intensifying competition.

The companies confirmed that four new models will be launched in China in the coming years under a brand introduced in 2024 that uses only the Audi name, removing the traditional four-ring logo and marking a structural shift in market positioning.

The partnership also includes the creation of an innovation and technology center in Shanghai, which will coordinate product development, software integration, and localized engineering. Audi said the expanded cooperation is intended to support faster product cycles tailored to the Chinese market, where domestic electric vehicle manufacturers continue to gain market share. The strategy reflects increasing pressure on European automakers to strengthen local development capabilities in response to pricing competition and rapid product launches from Chinese rivals.

The first model under the collaboration, the E5 Sportback, entered the Chinese market last year and has recorded approximately 10,000 units in sales. Audi reported that the model accounted for the majority of its electric vehicle deliveries in China during the first quarter, highlighting its role in targeting younger consumers in the world’s largest automotive market. 

Audi reported a 6.1% decline in first-quarter global deliveries to 360,106 vehicles, with China volumes falling 12% to 127,109 units. The company attributed the decline to weaker demand, the expiration of government subsidies, and ongoing model transitions. China remains Audi’s largest single market, but executives have acknowledged structural pressure from rising competition and shifting demand toward lower-priced electric vehicles.

Oliver Blume, CEO, Volkswagen Group, said: “In the past, development was centered in Germany and Europe, with global distribution built on consistent quality standards,” adding that “that approach is no longer sufficient given regulatory shifts, evolving customer expectations, and intensifying competition.” He also noted that Volkswagen is integrating China-based development processes into its global operations as competition expands across more than 150 market participants.

Audi said the SAIC partnership is designed to address these dynamics by enabling localized development and faster engineering cycles for China-specific models. The companies plan to strengthen joint operations through the Shanghai innovation center, which will serve as a hub for future vehicle architecture, software systems, and design coordination.

The shift in China forms part of broader global performance divergence across Volkswagen Group markets. While European deliveries increased 5.9% in the first quarter to 123,724 vehicles, North American sales declined 27% to 35,464 units, reflecting tariff impacts and regulatory changes. Deliveries in overseas and emerging markets also decreased 6.3% to 23,501 units, highlighting uneven demand conditions across regions.

Volkswagen reported a 4% decline in global deliveries in 1Q26, totaling 2.05 million vehicles, as weakening demand in China and tariff pressures in the United States affected performance. The company attributed the decline to “adverse conditions, including the broader contraction of the Chinese market and US trade tariffs,” noting that electric vehicle volumes were disproportionately impacted in both regions due to pricing pressure and competition.

At the same time, Audi is evaluating additional localization measures beyond China. The company is “seriously” assessing vehicle production in the United States to reduce exposure to import tariffs and strengthen its North American footprint, according to company sources. Audi currently faces a 27.5% tariff on vehicles imported from Mexico and a 15% tariff on European imports, increasing cost pressure in a key sales region.

As part of this evaluation, Audi is considering shifting production to the Volkswagen plant in Chattanooga, Tennessee, where internal assessments indicate “more than enough capacity” for additional output. The company currently relies on imports from Europe and Mexico, including the Q5 model produced in Mexico, leaving it exposed to trade policy volatility. Audi México exported 140,687 vehicles, a 2.2% decline from 2024.