NEW YORK – Audi of America Inc. is targeting increased sales, “but not at all costs,” says Axel H. Mees, vice president-U.S. and Canadian operations.

Despite being outsold by German competitors BMW North America LLC and Mercedes-Benz USA by a ratio of 3:1, Audi is more focused on becoming a Tier 1 premium brand – but not just to battle the German leaders, Mees says on the eve of the first media day at the auto show here.

"Japanese brands are the benchmarks for this segment, not BMW," he says, pointing to the high quality of the Japanese luxury cars.

"We need to develop Audi into a premium brand," Mees says. "Our product is premium, but we have to work on all the other facets of the business."

The Audi chief believes the A8 launched last June is a big factor in transforming Audi into a competitor at the segment’s highest levels. "This is our flagship," Mees says. He notes that the A8 racked up 5,000 sales last year, a 500% increase over the previous year. It now is selling at a rate of 500 units per month, compared with 200 per month for the previous model.

"It puts us where we have to be," Mees says of the long-wheelbase version of the A8 that goes on sale in mid-July and will base at $66,700. Audi expects to import about 2,000 of those models into the U.S.

In addition, Audi will launch a 12-cyl. version of the A8 by the end of the year. Mees doesn’t disclose the price but says, "We think we can justify a price very close to the BMW 760 and the Mercedes S600.”

Mees says he is counting on the ’05 A6 to boost sales this year, as well. The car, which made its U.S. debut at the show in New York, where the brand enjoys 25% of its annual sales, will have an average transaction price in the mid-$40,000 range for the model with the 3.2L FSI (direct-injection) V-6. The 4.2L V-8 model will have an average transaction price in the range of $50,000-plus.

Audi expects 80% of the A6s will be sold with the V-6. Because the ’05 model doesn't bow until late in the year, only 13,000 A6s are expected to be delivered in calendar 2004. The company expects to sell 30,000 A6s in a full model year, and it sees that eventually rising to 3,000 units per month.

Mees says Audi will do everything possible to support its sales objectives. "But we can't accept a weaker financial situation," he adds.

Mees says he left BMW AG, where he held positions in logistics, overseas assembly operations and the president’s office, because he wanted to work in the U.S. and decided there was no chance of getting the top job here. "My wife is American," he explains.

But Mees says he wouldn’t have left BMW for a non-luxury brand.

"I had to work with a premium car. I wouldn't work for Toyota or Mitsubishi," he says.