Announcing the U-turn in a series of tweets on Tuesday, the firm said it had listened to criticism of the advert for its RS4 car and apologised for using the "insensitive image".
"We hear you and let's get this straight: We care for children," Audi tweeted in its apology.
"We sincerely apologize for this insensitive image and ensure that it will not be used in future."
We hear you and let’s get this straight: We care for children. The Audi RS 4 is a family car with more than thirty driver assistance systems including an emergency break system. That’s why we showcased it with various family members for the campaign. (1/3) pic.twitter.com/XAeIjszUWQ— AudiOfficial (@AudiOfficial)August 3, 2020
The firm also said it would "immediately examine internally" how the advert - which appeared on Twitter - came to be published. Audi's own website markets the RS4 as a family car.
The retraction came after some critics labelled the child's pose as "provocative", while others pointed out that the driver of the vehicle would not be able to see the girl in the pose she had adopted, raising safety concerns.
Others said the image — which was posted alongside a caption that read "Lets your heart beat faster - in every aspect" — could be interpreted as sexually suggestive.
One Twitter user said: "So, let your heart beat faster in every aspect? Picture of - child with banana in mouth and flash car- so wrong in EVERY aspect".
Another added: "Let's add it up: Red=eroticism, sports car=substitute for potency, animal print mini-skirt=sex appeal, banana=phallic symbol. But sure this is all just accidental..."
The scandal comes just months after German car giant Volkswagen, the owner of Audi, became embroiled in a similar social media row and was forced to withdraw a car advertisement that was slammed as racist and insulting.
The car giant published a video on Instagram that showed a new Volkswagen Golf parked on a street while a woman’s large, white hand pushes a black man away.
The video then showed a hand flicking the black man into a cafe named “Petit Colon”, which translates in French as the ‘Little Colonist’.
The clip was accompanied by jaunty music, along with sound effects resembling a computer game.
The advert prompted a storm of criticism with social media users flooding in to accuse the firm of racism.
VW initially responded by saying the “origin of the people depicted” was “irrelevant” and that the firm opposed "all forms of racism, xenophobia and discrimination".
It also withdrew the advert and later issued a more comprehensive apology.
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