German Car Zone

Deutsch · 04-29-2006, 12:54 AM

http://www.businessweek.com/magazine...ndex+page_news

Quote:

APRIL 17, 2006

GLOBAL BUSINESS

Audi: Looking For Traction In The U.S.
The carmaker is counting on new models to replicate its success at home

The buzz around Audi's new TT was growing even before the sports car was set to have its glitzy unveiling beneath Berlin's Brandenburg Gate on Apr. 6. Across the Atlantic, Tracie Dean, general manager of Jim Ellis Audi of Atlanta, says customers have been showing up for weeks to put cash down for both the TT, priced around $35,000, and the $50,000 Q7 SUV. "People are just dying to get them," she says.

The question is, how many? For decades, Audi has taken a backseat in the U.S. to the more established Mercedes-Benz (DCX ), BMW, and, more recently, Lexus nameplates. Yet Audi has been enjoying roaring success in Europe, where it sells nearly as many cars as BMW. With European high-end consumers snatching up everything from its A3 compacts to its luxury A6 sedans, the Bavarian carmaker earned a pretax profit of $1.6 billion, up 14.6%, and revenues rose 8.5%, to $32 billion.

Audi's Achilles' heel, however, remains the huge North American luxury market, where it still needs to overhaul its network of dealerships and polish service and quality to better compete with BMW and Mercedes. So far this year, Audi has sold fewer than 18,000 cars in the U.S., vs. more than 63,000 sold by BMW, according to Autodata Corp., a Woodcliff Lake (N.J.) market research firm. "Audi is still rebuilding its brand image" in the U.S., says George Peterson, president of AutoPacific in Southfield, Mich. "BMW has been the picture of marketing consistency since 1977."

To close the gap, Audi Chief Executive Officer Martin Winterkorn is counting on not just the TT and Q7 but at least eight other new models that will come to market over the next two years, including a much awaited high-end luxury sports coupe called the R8. He's also behind a push to upgrade dealerships in 25 urban centers, from Miami to San Francisco, and split them off from the shared showrooms with the more prosaic Volkswagen. Quality is on the mend, too. Last year, Audi ranked eighth in J.D. Power & Associates Inc.'s (MHP ) annual customer survey of quality, up from eleventh in 2004.

The new TT, designed by Audi's Italian chief designer Walter Maria de'Silva, is surely an attention grabber, with its muscular stance, predatory-looking grill, and elegant lines. Still, it will be hard to top the first-generation TT, which was a smash when it rolled out in 1998. The model quickly became a powerful image maker for Audi with its crisp, geometric design that broke with automotive stereotypes.

BIG-CITY STYLE
The TT is all about burnishing the Audi brand, but it's the Q7 that could do the most to boost U.S. sales. The huge seven-seat SUV, built on the same platform as the Porsche (PSEPF ) Cayenne and the Volkswagen Touareg, sports clean styling and such features as a radar-based warning system to ease the problem of rear-view-mirror blind spots. Thanks to its partly aluminum frame, the Q7 will be the most fuel-efficient SUV in its class, getting about 20 mpg. And even if gas prices soar higher, "for anyone who can afford a Q7, the price of gasoline is an asterisk," says James N. Hall, AutoPacific's vice-president for industry analysis.

So far, analysts say, the Q7, which went on sale in March in Europe and will hit U.S. roads in June, is off to a good start. Audi expects to sell 76,000 Q7s in 2007, the first full year of production, including 35,000 in the U.S.

Of course, everything depends on Audi's ability to keep honing its quality image as it aims to crank out one hot model after another. Although Garel Rhys, professor of automotive economics at Cardiff University in Wales, thinks it would take at least five years, "it's not impossible for Audi to catch BMW" in the U.S. For Audi, the race is just beginning.

SDNR · 04-29-2006, 02:04 AM

I really think with Audi's image makeover - and purely European style - as opposed to BMW's and Mercedes' incresingly international-fusion styling, that Audi will eventually do extremely well in the US.

Deutsch · 04-29-2006, 02:09 AM

Yes, I truly do believe Audi is the least globalized design wise brand out there, compared to not only it's other German counterparts, but the industry as a whole. It seems like creating balanced, restrained, yet forward designs is a lost art. And this Audi exectues very well. Like I said though, for the enthusiast crowd they'll have to straighten up a bit w/ better drivers cars like the RS4, along w/ top tier service, reliability, and marketing, only then can they look forward to properity in the states.

Mr. M · 04-29-2006, 03:07 AM

Audi's situation seems uncannily similar to VW's. Brand recognition, service - the same words keep cropping up.

They need someone who knows what to do to advocate a change; or heck, they themselves should stand up and make changes like they should. Somehow now I'm feeling VAG is ignoring the US market for some reason or another.

Deutsch · 04-29-2006, 11:12 PM

Quote:

Originally Posted by Mirage77

Audi's situation seems uncannily similar to VW's. Brand recognition, service - the same words keep cropping up.

They need someone who knows what to do to advocate a change; or heck, they themselves should stand up and make changes like they should. Somehow now I'm feeling VAG is ignoring the US market for some reason or another.

Actually, its said quite the contrary. VW and Audi both are to launch a slew of N.A. market specific products in the coming years.

Deutsch · 05-01-2006, 09:15 PM

http://www.thecarconnection.com/Auto_News/Profiles_QA/5_Questions_Audis_Johan_de_Nysschen.S193.A10360.ht ml

"5 Questions: Audi’s Johan de Nysschen
More SUVs and sports cars for Germany’s “sophisticated” brand."

Quote:

Status quo is apparently not a phrase that Johan de Nysschen is familiar with. In less than 18 months on the job, de Nysschen has consciously moved to shake things up at Audi of America . The South African-born executive vice president is clearly not happy with Audi's performance in the huge U.S. market. And why should he, he asks during a breakfast interview. In Europe, the German luxury marque is now on a par with rivals like Mercedes-Benz and BMW. Yet in the States, Audi is a mere also-ran, selling barely a third as many cars as the luxury segment's leaders. The interview was conducted in Northern New Jersey, where Audi was set to give journalists a chance to drive its new Q7, the company's first sport-utility vehicle - but likely not its last, de Nysschen said with enthusiasm. As TheCarConnection's publisher, Paul A. Eisenstein, quickly found out, the 46-year-old executive has some clear ideas in mind for Audi's evolution and growth.

THECARCONNECTION: Is Audi's lineup complete? Do you need more SUVs, or other products?

DE NYSSCHEN: No, it's not complete. We're going to expand our product portfolio. We'll have at least one more SUV, possibly two. We'll have more sports cars, something between the TT, at the bottom, and the new R8.

The fact that we're moving away from platforms to modular (product designs) gives us lots of flexibility, and we can do a lot more derivatives. If you look at the Road Jet concept at the (2006) Detroit auto show, which was a slightly elevated car with a small footprint, it gives you an idea of what we mean about more derivatives. And then we have to look at drivetrains, like diesels, where we have to see an expansion, as well.

TCC: Speaking of diesels, are they better than hybrids, and if so, what does Audi have in mind?

DE NYSSCHEN: Diesels are better than hybrids - but under certain conditions. You have to have the right fuel, first, and have to make some changes to make them environmentally friendly. They're better than hybrids because for the driving conditions that represent the average American lifestyle, they can get better mileage. They produce beautiful torque and they're smooth and refined. And the fact we can use bio-diesel is another reason I believe the concept holds so much promise.

TCC: Has Audi caught up with Mercedes-Benz and BMW?

DE NYSSCHEN: I wouldn't like to call it "caught up," though in many ways we've surpassed them. Audi has incredible technology. We have mastered (all-wheel-drive) Quattro in ways nobody else has, certainly not those two manufacturers. We produce what are generally viewed as the benchmark of interiors. What we not done yet is to get our product costs under control. Our products are still too expensive.

Our image is precisely where we want it to be - prestigious and sophisticated. Our challenge is that our level of awareness lags BMW and Mercedes. That's something we will deal with by building our presence.

TCC: Unlike some companies with multiple brands, there appears to be a real firewall between Audi, VW, and other members of Volkswagen AG. What's the advantage?

DE NYSSCHEN: Though we cannot deny we are a part of the Volkswagen Group…we have guarded our independence jealously. We have been absolutely adamant that Audis will be built on Audi platforms.

TCC: So what about the apparent decision to start building some Audi products on VW assembly lines?

DE NYSSCHEN: We cannot justify building new Audi plants when there is an excess of Volkswagen (brand production) capacity. We realize it is not the kitchen that determines how good a meal is, but the chef. We will share body shops, but finally assembly will usually be done on a separate (Audi) line.

TCC: What single word best describes Audi's image - to people who own competitive luxury marques?

DE NYSSCHEN: I'd probably have to settle for "sophisticated," but I'd be frustrated having only one word. Audi is sophisticated, progressing and provides a feeling of well-being coming from the driving and ownership experience. Audi owners know this. Someone driving a Mercedes probably doesn't know this.

TCC: Five years from now, what luxury brands will be tops in the U.S.?

DE NYSSCHEN: In five years, we will see the same three brands, in alphabetical order: BMW, Lexus, and Mercedes-Benz. Audi has no aspiration to be the leader in the luxury segment. That is now how we define success. My aspiration is for the brand image, for customer loyalty, and for profitability. We want to have a balance of volume, (profit) margins, and a reputation for product excellence and a class-leading ownership experience.

TCC: In your brief time in the U.S. , you've taken some controversial steps, like cutting back on incentives, and announcing plans to drop the Audi Advantage - free service for Audi owners. Haven't you made some folks angry?

DE NYSSCHEN: Some of our dealers have not been very happy with me. We had to put our dealers on a diet. I have told them, "you guys have to learn how to sell products on the merits of the car," not with incentives. That has worked. We have brought our inventories down from 90 days (compared to an industry norm of around 60) to just 40 days, while building retail transaction prices on the A4 by 11 percent, on the A6 by 17 percent, and the A8 by three percent.

In the long run, incentives don't benefit anyone. They hurt your image…and erode resale values. Do you want to save up front, but then pay more when you trade in your vehicle?

So it looks like Audi has a commitment to earning my money afterall.

cawimmer430 · 05-02-2006, 10:49 AM

Quote:

Originally Posted by Mirage77

Audi's situation seems uncannily similar to VW's. Brand recognition, service - the same words keep cropping up.

They need someone who knows what to do to advocate a change; or heck, they themselves should stand up and make changes like they should. Somehow now I'm feeling VAG is ignoring the US market for some reason or another.

It is unfair to Audi that many people in the US seem to think Audi's are nothing more than "rebadged VW's", which for the most part isn't true at all. I wouldn't call technology sharing "rebadging".

I think Audi's biggest problem in the US is simply "image". It's considered a luxury brand, but not as luxurious as BMW, Mercedes or Lexus. I believe that image is slowly coming along, but it will be some time before Audi ever reaches the prestige of BMW or MB, if at all. Personally, I think Audi should simply focus on what they're doing now: perceived luxury AWD cars to keep their brand image consistant.

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German Car Zone

Audi's growing pains in the U.S. market