Audi Stalled

Audi of America Inc. says it will receive fewer vehicles from parent Audi AG for the '04 model year because of sluggish demand and the battering euro/dollar exchange rate that is stifling profits in the U.S.

Plans call for Audi to divert vehicles originally earmarked for the U.S. to other markets where demand is stronger and there is less negative impact from the strong euro. In all, as many as 2,000-3,000 vehicles will be taken out of Audi's U.S. vehicle allotment for '04.

“Our parent company is not very pushy in regards to sales in the U.S. (right now) because it is not extremely profitable currently,” Axel Mees, vice president in charge of Audi of America, tells Ward's during the launch of the S4 Cabriolet.

Audi reported a 17.1% sales increase in March, although Mees says year-to-date sales are nearly 3% below 2003 levels. He adds Audi probably will step up its exports to the U.S. again once the '05s are in production, bringing 2005 volume levels up to where 2004 was supposed to be.

Near-term, Mees says, Audi must reduce its dealer inventory levels before the end of May. The auto maker started the year averaging a 90 days' supply of vehicles, far higher than the 20 to 60 days' carried by most competitors. He wants inventory levels to get closer to 60 days' at the end of May and remain there for the year.

“Our plan, and I will do everything possible to make it a reality, is to be around 60 days,'” he says.

Mees expects Audi's U.S. sales this year to be on par with 2003's 85,700-unit level. Audi is focusing on increasing U.S. sales by a not-inconsiderable 100,000 units within the next five years, in an attempt to achieve parity with rivals BMW AG and Mercedes-Benz.

Meanwhile, Audi says it is considering removing the Allroad SUV from its lineup in favor of a wagon version of its A6. The switch could come in 2006, when the current model requires changes to meet regulatory requirements.

There are concerns that the Allroad and the upcoming Pikes Peak SUV would target the same buyers. The current Allroad is priced within the targeted range of the Pikes Peak.

“We are discussing with our parent company whether we need an Allroad at all,” Mees says.