(Bloomberg) -- Porsche AG is in talks with Chinese dealers to smooth out relations as weaker sales of electric vehicles force the auto industry to rethink the transition away from combustion-engine cars.

The German carmaker is discussing with its Chinese retailers how to adapt their business strategies and customer service to market changes, according to a statement. Porsche didn’t provide details on a new direction, but said both sides plan to work more closely together. 

Porsche and other western carmakers have seen their share of China’s EV market dwindle as local competitors increased their offerings and gained a bigger foothold. And with China’s economy bogged down by a real estate crisis, overall demand for EVs has weakened, prompting price cuts that have eaten into the bottom line for manufacturers and dealers. 

Chinese media reported that some Porsche dealers in China are now asking for compensation for selling EVs at a loss, and have also objected to this year’s sales targets. Last year, China accounted for roughly a quarter of Porsche’s overall deliveries.

Porsche’s deliveries in the China market fell 15% in 2023 and the sales continued to suffer this year, with the brand posting a 24% decline in the first quarter. Deliveries to North America also fell 23% in the same period but mainly due to a customs-related delay in shipping.

Tensions between Chinese distributors and German carmakers isn’t unprecedented. Volkswagen AG’s Audi brand resolved a dispute with its Chinese retailers in 2017 with undisclosed compensation payments. In 2015, BMW paid $820 million to its retailers in China to help cover losses. 

©2024 Bloomberg L.P.