Special Coverage

New York Int’l Auto Show

NEW YORK – Audi of America Inc. set a record for sales in March as it closed the books on a booming first quarter, with a volume increase of 34% over like-2009.

However, dealer lots have been left nearly bare, as days’ supply of inventory has dropped to 30 units.

“It's a good problem to have,” Johann de Nysschen, Audi's U.S. chief, tells Ward's in an interview at the auto show here, although he admits the oversupply in first-half 2009 has swung too far in the other direction.

For the last seven months, Audi’s deliveries have exceeded de Nysschen’s forecasts. “We will likely not restore a good supply (of vehicles) until the middle of the year,” he says. About one-quarter of Audi sales are cross/utility vehicles.

“There's an opportunity to grow that if we get more supply,” adds de Nysschen. “We could sell 500 more Q7s a month and another 1,000 Q5s per month, if we could get them.” Q5 sales in the first quarter soared 114.1%, while Q7 deliveries fell 11.5%. “We've been growing our (overall) market share for the past five years.”

Still, the auto maker’s market share remains unchanged from last year.

De Nysschen predicts Audi will grow faster than the other three leading brands in the luxury segment: Lexus, BMW and Mercedes-Benz. “But unless the sales are good quality business, I'd rather let it go.”

He has elected to refrain from matching the current aggressive incentives of his competitors, even though the luxury market is highly competitive. “If one goes down selling for the best deal, it's a slippery slope, abandoning the reason people buy luxury vehicles.”

De Nysschen says aggressive leasing deals are not a good strategy to follow in the segment, either.

But he notes an expanding demand for entry-level compact vehicles is slowly emerging in the luxury segment. The A3 is one of the pioneers, with sales more than doubling to 1,450 in the first quarter without any advertising or marketing support.

Margins on the compacts are tight, de Nysschen says. Audi also is at capacity in Germany because of demands in other markets for the small car, and he predicts the luxury segment in the U.S. will evolve to sell more downsized cars.

One interesting thing to note about the A3 is that 50% of its sales here are powered by diesels, he says. “That's a great opportunity for us in the future. We could get greater allocations of the A3 in the future.”

De Nysschen expects the next-generation A3, due in 2013, will sell in higher volumes in the U.S. at the same time European deliveries decline as the current model gets older. “That might mean a greater supply for us,” he says.