Joint venture may start with online sales to avoid conflict with FAW-Volkswagen, Li Fusheng reports.

SAIC Volkswagen Automotive Co has decided to set up an Audi division, becoming the second joint venture to localize and sell cars with the four-ring emblem in China after FAW-Volkswagen.

The Shanghai-based carmaker's executive vice-president of marketing and sales will take charge of the division, said Chinese magazine Automotive Business Review quoting a person familiar with the matter last week.

The person said that the division will adopt a new business mode but did not elaborate further on it, while the magazine said that SAIC Volkswagen might first try online sales of Audi cars, which would prevent head-on conflicts with the brick-and-mortar sales network FAW-Volkswagen has built.

Audi China told China Daily in a statement that it is "currently preparing the related processes and structures with our partners."

It added, "The SAIC-Audi project is progressing on schedule as agreed with all stakeholders."

Audi and SAIC inked the deal to localize and sell Audi cars in late 2016. FAW-Volkswagen, Audi's first partner in China, has been producing and selling the absolute majority of Audi cars in the country.

SAIC Volkswagen's move to set up an Audi division comes after the premium German marque acquired a 1 percent stake in the joint venture in late June.

Equity ownership in a joint venture is a prerequisite for international carmakers to localize models in China, according to the country's industrial policies.

Currently, SAIC holds a 50 percent stake in the joint venture; Volkswagen AG, 38 percent; Volkswagen Group China, 10 percent; and Skoda Auto, 1 percent.

According to industry insiders, Audi's 1 percent equity is expected to rise as the situation evolves.

In comparison, it holds a 10 percent stake in FAW-Volkswagen.

Audi China called the 1 percent equity "one base to start the planned first car projects in terms of development and production preparation with SAIC Motor."

In an interview in late April, Audi China President Joachim Wedler said Audi and SAIC were in the process of deciding which of its models would be manufactured, and that the final picks would emerge within months.

He added that planning on building production and sales networks would come after model planning.

Cars from SAIC Volkswagen will not hit the market until 2022, according to a deal Audi reached last year with FAW Group, FAW-Volkswagen and the China Audi Dealers Association on the future development of Audi in China.

Audi has said it hopes that the partnership with SAIC will help to complement its development in China, where it has been the sales champion in the premium segment for decades.

FAW-Volkswagen has been and will remain the most important partner for quite a long time to come for Audi to defend its position in China, according to analysts.

Audi has decided to more than double the local model portfolio at FAW-Volkswagen in the next five years, said Wedler in an interview in June.

The joint venture is also enriching its Audi lineup with electric models, which are gaining in popularity in China.

Audi's first electric car, the e-tron, will be localized starting in 2020 at FAW-Volkswagen. By 2022, the joint venture will offer 10 electric Audi models in different segments.