GS69

Audi US Chief:
Profit Means More than Hitting Sales Goal

ORLANDO -- Despite Audi's oft-stated plans to sell 200,000 vehicles in the United States by 2018, the luxury brand's North American chief says profitable growth is more important.

"We are not going to chase volume for the sake of volume," Johan de Nysschen, president of Audi of America, said at the U.S. National Automobile Dealers Association Convention this month. "We will only grow if it puts an extra dollar in the bank. Otherwise it is no good."

De Nysschen said he expects Audi's U.S. sales to increase this year, probably to just over 90,000 vehicles.

Audi AG CEO Rupert Stadler established the 200,000 goal for the company's North America unit. In 2009, Audi sold 82,716 vehicles in the United States.

To feed growth and bolster thin inventory, Audi will increase production for North America by 10 percent, de Nysschen said. Today's supply is at 38 days vs. a goal of 60 days. The supply should begin to increase in late April as the extra production arrives.

De Nysschen said Audi should be back at a 60-day supply in May or June.

He also confirmed that Audi will introduce a gasoline-electric hybrid version of the Q5 crossover in late 2011.

U.S. production of Audi vehicles is not imminent, de Nysschen said. The brand needs to build volume before it commits to North American production, particularly to justify its own plant, he said.

"You need to build about 100,000 copies of a car," de Nysschen said. Audi's highest-volume nameplate is the A4 car, which sold 37,070 units in 2009.

Audi is first considering ways to generate North American content. One strategy could be establishing an engine and transmission plant here and shipping the powertrains to Europe for assembly plants there, he said.

Audi dealers would like to see the brand get into additional segments in this market. They've asked about a car smaller than the A3. But de Nysschen said the smaller A1, already sold in Europe, is too small for the United States. He said Audi will improve the fuel efficiency of its U.S. fleet by outfitting existing U.S. vehicles with additional powertrain options.

Jack Hanania, chairman of the Audi National Dealer Council, is optimistic.

"If we continue to grow our market share, I think Audi will continue to deliver some more products," said Hanania, who owns Audi, Acura, Volkswagen and Hyundai stores in Jackson-ville, Fla.

Audi also said:

-- Exclusive stores posted a 2.5 percent return on sales in 2009. That marked a rebound after slipping as low as 1 percent, de Nysschen said.

-- It will work with the dealer council this year to renew its dealership margin and bonus plan for 2011 and beyond. Dealers should get details in the fourth quarter. The current bonus system expires this year.

TRDFantasy

Good to see Audi is not chasing volume.

Audi is targeting a 60-day supply for vehicle inventory? Not sure that's exactly a good thing.

LexFather

Audi is completely full of some serious crap.

Audi not everyone in America is someone who doesn't read an think car and driver is te bible.

Audi you have boasted on selling 1 million Cars a year. Today you sell around 900,000 or so.

Audi you revealed a tiny sub sub entry level A1 just last Month so it helps with volume.

Audi you have bragged on your market share gains in 2009.

Did you really tell us you don't care about volume?

I8ABMR

they are taking the Porsche sales approach.........probably not going to work as well for a manufacturer that produces most of its vehicles in a class that has competition from so many sources. They cant even make a car with no electrical issue ( including the R8 ) so how do they expect to fool people into buying their cars at a premium mark up. I think the offerings from Mercedes and BMW are better

FinalBurst

The future A3 is coming as a sedan. I'm not sure if there's going to be an A2 so the dealers' wish may not be coming to fruition.
I'm dreaming of a Q6, smaller than the Q7, but a bit larger than the Q5.

TRDFantasy

Audi already has the A1, A3, A4, A5, A6, A8 and the A7 is coming as well.

Then they have the Q5 and Q7.

Why not go all the way, and offer A2, Q1, Q2, Q3, Q4, Q6 .

Fizzboy7

I think a car company can introduce more models, while NOT making volume it's core focus. The two can be seperated and a company can expand while making something else the priority.

But I do agree it's awfully suspicious Audi changed their direction so fast. It's obviously very unpopular right now to go for volume, considering Toyota's recent quality woes. If that is really the motive behind Audi's new direction, it's kind of a cheap shot to be putting out such an inaccurate press release.

IS-SV

More empty press releases by execs.

Pitman

Unless the Audi US Chief is announcing a one day everything half off sale on the S5, I'm not interested.

LexFather

Audi like Lexus has the luxury of a much larger owner in VW/Toyota. Audi will always be profitable. Like Lexus they share tons of parts and it works.

Saying Audi is not after volume is b.s. Who doesn't want to sell more cars? Hell Lambo, Ferrari have entry level cars to sell more cars.

The issue is Audi made some SERIOUS gains last year in sales, passing Infiniti and right behind Lincoln.

2009 Total
Lexus 215,975
BMW 196,502
Mercedes-190,604
Cadillac-109,092
Acura-105,723
Buick-102,306
Lincoln-82,847
Audi-82,716
Infiniti-81,089
Volvo-61,435

Unless there is an influx of new buyers, the economy changes and other brands falter I can't see Audi jumping in the realm of Lexus, BMW, Benz here. I can see them possibly jumping past Buick, Caddy, Acura but even that will be tough.

Audi has a vast product line but their dealer network needs help in not just an attitude adjustment but in getting the right products for them to sell. Audi in Germany sends a terrible mix of cars here. They need better allocation.

Audi also might be saying without saying it "F U America, China is where it is at". Audi does very VERY well in China, even building cars there.

And why not? If forecasters predict America's luxury market is declining and China's is growing it makes sense to really focus in China.

theanimala

Well, I do believe it shows they are not chasing volume over profitability by looking that their lease deals. Audi's leases are generally VERY expensive because they do not subsidize the depreciation. I see a lot of people complain on the Audi forums that they would go for an A6 / A8, etc but instead go for the 5 or 7 series because they can lease the BMW's for hundreds less a month. The problem is while BMW get's more sales that way, they end up paying for it on the backend when these cars come back with values that are not inline with reality. If Audi offered those types of leases I think they would have quite a few more sales, but really what's the point if you loose money after the fact?

LexFather

Good point. BMW (and Infiniti) subsidize leases where they are basically given away. People will shout "well a sale is a sale" but we have seen BMW Germany complain about the tactics use in the USA a couple times now.

Very good point. If Audi sticks to its guns more credit to them.

Hypnotik

Thats total BS. So much of their marketing currently is them saying they are the fastest growing luxury brand...growing faster than lexus, mb, blah blah. They are just saying this now because they have a huge lineup comparable to MB and BMW but their sales are still nowhere near where it should be. They've pretty much covered every car segment but still haven't grown a whole lot sales wise.

mmarshall

Volume alone, of course, does not guarantee profitability. It depends on the spread between wholesale/retail and how much the public is willing to pay for any given model. For years, for example, despite the higher prices for hybrids, both Toyota and Honda either lost money on the sale of hybrids or barely broke even, because even the higher prices did not reflect the true cost of production. But because of a number of other factors, Toyota and Honda did not want to (or couldn't) raise the prices to reflect the actual production costs. So, instead, they simply subsidized hybrids with the profits they made from other vehicle types.

One other thing at Audi that may (?) make it difficult for them to really make major profits on the sale of each car is that, despite their well-known electrical problems, they use solid, high-quality materials in the construction of their vehicles. Check out the Audi sheet metal, paint, trim, interior fit/finish, hardware, etc.... and you'll see what I mean. To both use good materials AND keep prices competitive at the same time, means, of course, that profits may take a hit.