SHANGHAI (Reuters) – Germany’s Audi is in talks with SAIC Motor Corp to buy an electric vehicle platform from the Chinese state-owned automaker, two people familiar with the matter said, an unprecedented effort to shore up market share.

The move, coming as sales of Audi’s EV products fall sharply behind those of Tesla and domestic competitors such as Nio, spotlights the pressure on all legacy and Western brands in the world’s largest auto market, as they battle over EVs.

The premium car brand of Volkswagen AG seeks to take over the EV platform owned by SAIC’s EV unit, IM Motors, said the sources, who sought anonymity as the matter is private. Talks are at an advanced stage, one of them added.

IM Motors, which started delivery of its first model, the L7 sedan, in June 2022, is a premium EV brand controlled by SAIC and its investors include e-commerce giant Alibaba Group.

Audi declined to comment on whether the talks were taking place. SAIC declined to comment.

Reuters was not immediately able to establish the price Audi has offered for the EV platform and whether SAIC would still be involved in making the L7 sedan after the deal.

Chinese media outlet Mingjing Pro reported Audi’s potential takeover of the platform on Tuesday. Earlier, Automobilwoche said Audi was in discussion with several manufacturers to acquire an EV platform, but did not identify them.

Established automakers, such as Toyota, have been racing to follow the lead of Tesla and some Chinese EV makers in designing EV platforms engineered from the ground up in the effort to cut costs, improve performance and protect margins.

Audi has not bought a platform from another manufacturer before and until now, has used Volkswagen’s EV-dedicated MEB platform for models on offer in China, while concurrently developing a new EV platform with Porsche.

Last month, Audi chief executive Markus Duesmann, who will step down from the role in September, told Reuters the brand had to speed development of new models to meet a surge in demand for electric vehicles, especially in China.

However, its sales performance has fallen short of expectations, because of a lack of vehicles optimal for Chinese needs, he added.

Audi offers two EV models – Q4 e-tron and Q5 e-tron – developed on Volkswagen’s MEB platform in China.

Sales of Audi EVs were just over 3,000 units in the first quarter in China, while BMW sold 21,646 EVs and Tesla sold 137,429 cars, figures from industry body the China Association of Automobile Manufacturers show.

Audi and Porsche have also been jointly developing a new EV platform called “Premium Platform Electric” (PPE), to be adopted for cars turned out from the end of 2024 at a plant the former is building in China’s northeastern city of Changchun.

The plant will produce adaptations of the PPE platform tailored to the Chinese market, an Audi spokesperson said.

(Reporting by Zhang Yan in Shanghai and Victoria Waldersee in Berlin; Editing by Clarence Fernandez)

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