Audi Sees Transitioning U.S. Market as 'Real Opportunity'

By Michelle Krebs January 26, 2009

By Bill Visnic

2009 Audi A4.jpg Admitting it may be difficult to see much of a silver lining in what happened to the U.S. auto market in 2008 -- not to mention the likely prospects for 2009 -- executives at the Volkswagen Group's Audi AG still are confident the increasingly effervescent Audi can make gains in the face of worldwide industry stagnation.

Calling the traumatized U.S. market "a real opportunity for Audi," Peter Schwarzenbauer, Audi AG member of the board of management, projects potential gains for Audi out of the U.S. turmoil that's staggered the confidence -- and momentum -- of nearly every brand.

Schwarzenbauer says the chaotic market may be helpful to Audi, a company still working to achieve parity with the entrenched luxury-brand establishment, the Mercedes-Benzes, BMWs and Lexuses of the world.

"In a 'normal' environment, people don't want to change brands," he said in an interview with AutoObserver at the recent Detroit auto show. "Now they might."

He added that although Audi's U.S. sales in 2008 were down 6.1 percent (compared with a record 93,508 sales in 2007), it marked the first time in Audi's history that it sold more than 1 million units worldwide. And while most automakers are licking their wounds, Audi intends to go full-bore with its broad strategy to become one of the industry's most prominent luxury-sport brands.

"We assume most of our competitors are going to hit the brakes in 2009," Schwarzenbauer said. But Audi will stick with a plan to increase its U.S. marketing budget by 15 percent. And to expand its model portfolio from today's 26 models to 40 models by 2015 -- at a cost of some 2 billion Euro annually.

Forget the nation's current economic tribulations, adds Johan de Nysschen, president of Audi of America Inc. The general trend, he said, is that people are getting more wealthy. And more discerning. Both play to Audi's market position.

He also said Audi views the U.S.'s problems as a "short-term distraction" that is affecting the model and equipment mix -- Audi's emphasizing the stout, turbocharged 2.0-liter four-cylinder engine in the fully redesigned version of its best-selling A4 lineup, for example -- but won't derail the company's big-picture strategy, which it stated last year was to bring the brand to 200,000 U.S. sales by 2015.

"We could have sold 100,000 cars in the U.S. [in 2008] if we wanted to," asserts de Nysschen. But he said Audi will not denigrate its brand image by piling on heavy incentives to hike sales volume -- despite the fact that was the tack taken by many luxury competitors in the second half of last year.

"We won't go there," said de Nysschen, calling outsized incentives "fundamentally wrong."

He did admit, however, that Audi inventories at the end of the year were not optimal, saying they were "10 to 15 days too high," but confidently added, "We don't do fire sales at Audi."

Photo by Audi

Audi launched a fully redesigned A4 in the U.S. in the second half of 2008 and plans to emphasize the car's powerful but frugal turbocharged four-cylinder base engine.

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