Audi became the first premium global brand to produce cars in China when it opened its first facility in 1988. It runs a joint venture with parent Volkswagen Group and China's FAW Group.

Audi now has two plants in the northeastern city of Changchun with a combined production capacity of 400,000 units a year. They make the Audi A6 and A4 sedans as well as the Q5 and Q3 SUVs.

It has a new plant in Foshan, Guangdong province, with an annual capacity of 150,000 cars. The factory will begin producing the all-new Audi A3 sedan at the end of this year.

Stadler is confident of the potential of China's premium car market in the long term because the rate of car ownership in China remains much lower than in the West.

'Prudent' development

The number of cars per 1,000 people here in China is 80 to 100, whereas in Germany, the figure is more than five times that, Stadler said.

"So there is big potential, and we would seek to harness that potential but in a prudent way," he said.

He said there should be a strong emphasis on qualitative growth.

"It doesn't help you if you invest in overcapacity that you cannot fully utilize afterward, and the result would be that you have to give discount after discount," Stadler said.

Audi and its joint venture have two models making their world debut at the auto show - the new A3 sedan and the sport version of the S3.