Audi will expand in China with Shanghai Motor deal, report says

Audi will expand in China with Shanghai Motor deal, report says

BEIJING -- Audi and China's SAIC Motor Corp have signed an agreement that will likely pave the way for the automaker to produce cars in China with SAIC, a person familiar with the matter told Reuters.

The move, if finalized, would allow Audi, a unit of Volkswagen Group, to significantly expand its ability to produce cars in China, the world's biggest auto market.

Audi currently produces all its cars in China jointly with FAW Group Corp in the southern city of Foshan, near Guangzhou, and in the northeastern city of Changchun. Both SAIC and FAW are Volkswagen's joint venture partners.

Executives of Audi and SAIC formally signed the "cooperation framework agreement" on Friday, and Audi is expected to announce the move on Monday, the source said. The two sides agreed to continue to talk and try to nail down details of a deal for Audi to produce cars in China with SAIC, the person said.

Neither SAIC nor Audi could be reached immediately for comment.

Research firm Bernstein said in a note published on Wednesday that "the implications of such a move would be profound." It would give Audi and VW Group a way to reap more profit from China, it said.

In Foshan, Audi produces the A3 compact car and its variants, while in Changchun the brand builds the long-wheel-base versions of the A4 and A6 sedans, as well as Q3 and Q5 crossover SUV models, among others.

Audi is expected to launch in China a plug-in electric hybrid version of the A6 L, a long-wheel-base version of the A6.