NEW YORK – Dwindling inventory holds back Audi's ability to carve out even more sales in the recovering automotive market, says Johan de Nysschen, president of Audi of America.
“We're down to a 27-day supply now,” de Nysschen tells Ward's in an interview at the New York International Auto Show. “We simply can't get our inventory up to (an optimum) 60-day supply.”
He says Audi is building more cars for the U.S. than ever before and still can't satisfy demand for the Q5, Q7, A8 and A5, all of which are below a 20-day supply.
“It's quite challenging,” the Audi chief says. The small number of choices on Audi dealer lots is pushing up custom ordering. “It's up to 31%,” de Nysschen says.
“That's high for us and unsustainable because we're losing business opportunities and causing our 277 dealers some consternation.”
Despite the booming sales, de Nysschen says, “I have no doubt that some of our dealers are unprofitable.” But he says Audi dealers average a 3.27% return on sales.
The profitability of the Audi franchise is attracting investors. The average investment for a new Audi dealership is about $10 million, not including land.
During Audi's run-up in sales over the last five years, the auto maker has strengthened its share in previously weak markets, such as Florida. “Our market share in California went from 3.5% to 10% over five years,” he says. “Now we're looking at growth in the South, particularly in the Dallas and Houston areas,” which includes adding dealers.
Although Audi's biggest growth opportunities lie in the South, it is seeking to strengthen its dealer network in the Midwest also. “Chicago is also important for us,” de Nysschen says.
While seeking growth, Audi is intent on maintaining profitability. However, de Nysschen admits Audi is challenged to compete on average selling prices with its German luxury competitors. “Their sales mix is far richer than ours,” he says.
The big reason is that the auto maker's volume vehicles are the A4 sedan and Q5 cross/utility vehicle. Only 15% of sales derive from the midsize A6 sedan. Also, Audi's U.S. prices overall are lower than in other markets.
“That's something we have to address,” de Nysschen says. “In other markets, Audi does much better in richness of business.” One of his targets is to increase A6 sales from the current 15% to 55%.
He also says the just introduced A7 5-door sedan will help increase the richness of Audi business. “A big focus of our business going forward is to sell more high-end cars.”
Audi also is targeting more diesel sales. De Nysschen predicts half of Q7 CUV sales will be diesel models. “But (again), we are so significantly under supplied and could sell twice the amount we now do. We're competing for supply with Europe and China.”