Audi’s U.S. Chief Vows Not to Buy Sales

NEW YORK – Despite being off to a slow start in 2009, Audi of America Inc. won’t be persuaded into chasing buyers with big retail incentives and profit-draining lease deals, says President Johan de Nysschen.

While it bucked the industry’s worst slide in a quarter century and eked out a 2.4% gain in volume last year, Audi deliveries were off 25.4% through the first two months of 2009. But de Nysschen can take heart that February, typically a weak month for Audi, saw the brand’s market share climb a full point from year-ago.

That gain comes despite incentives that are close to the lowest in the luxury segment, de Nysschen tells the International Motor Press Assn. here. Only Acura offers a lower range of incentives, and that brand occupies a price range below that of Audi, he points out.

“Audi has consistently refused to buy market share,” he says “It’s about profitability for our dealers.”

That’s a big reason Audi’s retailers are investing $50 million in 52 construction and renovation projects under way to upgrade their facilities, de Nysschen says. No Audi dealer has pulled out of previously drafted plans for improvements, even though the retail market is in steep decline.

Two New York-area dealers, Bell Audi in Edison, NJ, and Audi of Manhattan, will complete their renovations next month.

“It is progress and innovation that will lead our industry out of these difficult times,” de Nysschen says of the investments being made by dealers.

Public awareness of the Audi brand is at a record level as its share of the luxury market continues to rise.

A5 cabriolet bows in fourth quarter.

“Our consumer awareness jumped 8% last year, and consideration for Audi vehicles grew by 7%,” he says. “Most importantly, drivers (rating) Audi as an ‘excellent’ brand reached its highest level in our history.”

Although de Nysschen says Audi does “feel the (current) pinch,” he believes the brand has momentum on its side.

“We are planning for success,” he says, indicating the auto maker is increasing its marketing outlays this year. “Our foot remains on the accelerator.”

Audi’s 270 dealers averaged a 2.2% return on sales last year, a figure de Nysschen claims is among the best in the industry. Its 124 exclusive dealers account for 72% of the brand’s sales. The profitability of the stand-alone stores exceeds that of dual-brand dealerships, he says.

The South African-born executive, who has led Audi since December 2004, admits he doesn’t have the answer to when the bad times will end.

“In the immediate future, with a broken economy, consumers will remain extremely cautious and search for ways to stretch their dollars,” he says. “But we’ve prepared ourselves to deal with a downturn.”

De Nysschen is convinced a product blitz that features seven new models this year will strengthen the brand, calling the current product portfolio “the envy of many of our competitors.”

Among the new models due this year are a TDI clean-diesel-equipped Q7 to be introduced in the second quarter and an S4 cabriolet to bow in the third quarter. The A5 cabriolet and an A3 TDI clean diesel will be released in the fourth quarter.

Audi also has visions of even more diesel-powered vehicles.

“The future of the car industry rests on clean and efficient vehicles,” de Nysschen says, while downplaying the role of hybrid-electric vehicles.

“The bloom seems to be coming off the hybrid rose,” he says. He notes used-HEV resale values are down 23.5% since their peak last summer and 4.5% since the beginning of 2009, according to Kelley Blue Book, while overall used-vehicle prices are up.

The Audi executive is not confident about electric vehicles either, saying most power grids will be hard-pressed to provide enough electricity to recharge EV battery packs.

He has special reservations about plug-in hybrids, because they may not be price-competitive in the marketplace.

De Nysschen calls on the federal government to create an energy policy that is not focused on one technology solution.

Much of Audi’s vision focuses on diesel innovation and U.S. market acceptance. De Nysschen says Audi’s TDI technology doesn’t require a big investment.

“It’s here,” he says, pointing to the R15 TDI unveiled at the 12 Hours Sebring Race earlier this month as the most advanced Audi diesel yet.

“The diesel needs to be redefined for the American public,” he says. “American audiences are, of course, skeptical of diesel. But innovation is about pushing the envelope and challenging the industry standard.”

The Audi chief again rules out adding cars smaller than the A3 to the auto maker’s U.S. portfolio at this time. That includes the A1, scheduled to go on sale in Europe later this year. It is 10 ins. (25.4 cm) shorter than the A3 sold in the U.S.

“I’m not interested in parking Audis in as many driveways as possible,” he says. “But I’m interested in parking them in the right driveways” and maintaining Audi’s elite status.

De Nysschen says he is not pressured by Audi AG targets to outsell its German competition or deliver 200,000 units annually in the U.S. by 2015.

“I’m not married to any particular year and any particular sales volume,” he says. “But 200,000 (units) is not an unrealistic or hard target for us.

“In Europe, we are poised to exceed BMW and Mercedes-Benz in sales by 2010. We have already started out ahead of Mercedes-Benz in global sales for 2009.

“With all the strides we’ve been making in recent years in the United States, we have reason to believe it is only a matter of time before we are the leading choice of luxury-car buyers here.”