Audi hints it’s nearing pact with China’s biggest carmaker, SAIC Motor (600104.SH) as the German premium brand pushes to regain share lost to Mercedes-Benz and BMW in the world’s biggest market. The speculation send their stock higher up this week.

Audi To Add One More Manufacturing Partner After FAW Group

Audi parent Volkswagen Group and China’s SAIC Motor Corp. (600104.SH) invited parts makers to bid to become suppliers for an Audi A7L they plan to build, according to a document they posted on the website of the China Bidding and Purchasing Network. Interested bidders can obtain bidding documents by Dec. 9, according to the statement posted on Dec. 2.

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The document suggests that longtime talks between Volkswagen and SAIC over Audi have progressed to the point that they can start laying the groundwork to set up a supply chain. Audi delivered just over 663,000 vehicles in China last year, narrowly beating Daimler’s Mercedes-Benz with 653,000 cars. BMW sold about 640,000 vehicles, including Mini cars.

More Partnership Signals Higher Expected Earnings

SAIC and Volkswagen have been in talks to expand cooperation to include Audi and the two parties have come up with preliminary plan as per what cars they would make together, SAIC Chairman Chen Hong told shareholders in May.

After entering the country in the late 1980s with FAW and building an early lead, Audi sales rose and the marquee became the quasi-official ride of high-ranking government officials and privileged businessmen. Yet Audi recorded its first annual sales drop in China in more than a quarter century in 2015, and Mercedes-Benz and BMW have won over buyers with new designs. SAIC is expected to finalise its plan with Audi at an appropriate time next year.

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