Audi Dealers in China Demand $4 Billion in Compensation

Audi AG’s dealers in China claim the company set up too many distributors in the country and should pay them 28 billion yuan ($4.1 billion) to cover their resulting losses over the past three years.

Bloomberg News reports that the dealers also aim to block Audi’s plans to launch a second manufacturing and sales network in China with SAIC Motor Corp.

The dealers are affiliated with Audi’s current production and distribution venture with FAW Group Corp. The retailers claim that Audi vowed in 2012 to achieve 1 million annual sales by 2020 with a network of 580 dealers. Last year the company sold 591,600 vehicles in China (including Hong Kong) through 530 dealers.

Audi tells Bloomberg it didn’t set the 1 million-unit target. The company also believes its retail operations in China were profitable over the past three years.

Audi became the preferred brand among Chinese government officials and top business executives a decade ago. But in 2015 its sales declined for the first time in more than 25 years. Last month Audi sales in the country plunged 35% to 35,200 units as BMW and Mercedes posted gains of 18% to 51,000 vehicles and 35% to 59,000 cars, respectively.