There are reports emerging from the Chinese automotive industry that the Government are to stop buying Audi vehicles.

At present Audi dominate the luxury car market, with the Government being one of their main customers. It is estimated that this particular section of the market is worth $13 billion.

As reported by us earlier this year, Audi’s number one market is now China, with their home country of Germany standing at number two.

The 412 approved models by authorities will be limited to Chinese brands. The list is up or debate in March.

The Chinese Government has also held back on incentives for foreign investment from automakers. This is to prevent overcapacity of vehicles.

Foreign automakers dominant

Although the measures may seem slightly drastic, the figures show that foreign automakers are over dominating the Chinese car industry. 80 per cent of the market is made from foreign brands. Audi accounts for one third of Government fleet vehicles. 20 per cent of Audi’s sales are to the Government.

Audi is still a very popular vehicle in China. Many owners would love to buy one if they could. Holding Audi back may not be the right answer. Many believe this step would be too sudden and too soon.

Fastest growing luxury manufacturer

What would this mean for Audi? In 2009 China overtook North America to become the world’s number one auto industry. Audi have taken full advantage of that and maximised business in the country. This is one of few countries where the likes of BMW and Mercedes-Benz find themselves falling behind Audi in the sales charts. Throughout the world Audi are the fastest growing luxury car manufacturer. Growth statistics are the highest of any other luxury manufacturer. A lot of this is down to experience, success and profit made from the Chinese car industry. Could all of that about to be changed?

This will not just affect Audi. General Motors and Volkswagen will also see business shrink if Government proposals go ahead. General Motors were making better progress in China along with Volkswagen. As the Chinese automotive is the largest in the world and is still showing signs of growth, this would come as a big blow to all. This leaves automakers FAW Car Co and Donfeng Automobile with a great opportunity. They will now find it easier to compete with the likes of General Motors, Audi and Volkswagen.

Audi is planning to sell 1 million cars over 3 years in China. The countries current largest luxury car supplier appears not be worried at a potential slowdown with the world’s largest automotive market.

Rivalry

They will have to fend off their German counterparts, BMW and Mercedes-Benz. Both of which have performed very well in China this year, despite Mercedes-Benz experiencing a slowdown in sales earlier this year. Some have been surprised at the high sales of expensive luxury cars as the overall Chinese automotive markets experienced an overall downfall towards the end of the year.

Great sales

Audi sold 30,000 cars in China last month alone (Sales figures include units sold in Hong Kong). January to November sales equate to 283,600. That represents a year on year improvement of 35.2 per cent. BMW and Mercedes-Benz also experienced a growth in January to November sales of 40.7 per cent and 35 per cent respectively.

A slowing economy

This year represents an unfortunate on the whole poor performance for the Chinese automotive market. Back in 2009, sales rose to 53 per cent and 33 per cent in 2010 from January to November. This year saw a jump of just 5.3 per cent from January to November. It may come as no surprise as local authorities have been forced to push cars off the road due to the notorious congestion within the country. Tax incentives for purchasing small cars have also stopped in China.

Everything on track

Dietmar Voggenreiter, Audi’s President for the companies Chinese operations stated clearly that everything is in place for 1 million sales target to be achieved. He said “This is the first year of the three-year period where we’d like to reach this target to sell 1 million, we started already with a new sales record. So we are well on track to achieve 1 million in three years,’ he told Reuters in an interview.”

Although the luxury car market is not experiencing sales like that of America and Europe,  Mr Voggenreiter expects sales to increase by 8 to 10 per cent next year.

Audi’s Chinese market is so big that it has now replaced Germany as the company’s largest market. They plan to build a new factory in the country next year and take production capacity levels to 700,000.