Long the leader in China, the luxury carmaker seeks similar growth stateside
During a family vacation driving up the California coast last August, Audi Chief Executive Officer Rupert Stadler was displeased by what he saw—or more precisely, didn't see—on the streets of America's most affluent neighborhoods. "I simply see too few vehicles with the four rings when I am driving on the highways there," Stadler says, referring to Audi's iconic logo. "We still have work to do."
That's a humbling realization for the brand that surpassed BMW and Daimler's Mercedes-Benz in luxury sales in Europe last year. It's also been the luxury leader in China since its entry in 1988, three years after its parent, Volkswagen. Yet nearly two decades after its reputation in the U.S. took a hit over concerns its cars were subject to sudden acceleration, Audi only recently has started to regain traction in America.
The automaker's U.S. sales trail those of BMW, Mercedes, and Toyota Motor's (TM) Lexus. True, Audi will sell more than 100,000 cars here for the first time this year and the carmaker aims to double that figure by 2018. Stadler needs a North American bounce to meet his ambitious goal of leapfrogging his German rivals to become the world's No. 1 maker of luxury cars by 2015. VW also is counting on Audi to remain a profit driver: The division's third-quarter return on sales hit 11 percent, besting BMW's automotive operating margin of 8.1 percent and Mercedes' 9.5 percent.
Stadler, who took charge four years ago, is spending 2 billion euros ($2.7 billion) annually to improve technology and introduce new vehicles. Audi will add six new models in the next five years, which could include a new small auto, compact sport-utility vehicle, and a sports car. The carmaker is also laying out millions to run quirky commercials during blockbuster events like the Super Bowl and Academy Awards.
Some trendsetters have taken notice: Celebrity Audi drivers include New England Patriots quarterback Tom Brady and his supermodel wife Gisele Bündchen, as well as Taylor Lautner from the Twilight films and Chace Crawford of TV's Gossip Girl. "Audi has a young, hip image—it's attracting a lot of young Hollywood types," says Rebecca Lindland, who tracks luxury carmakers at researcher IHS Automotive (IHS).
To boost Audi's awareness in the U.S., the carmaker in 2009 sponsored the evening newscasts on ABC, CBS, and NBC on President Barack Obama's inauguration day by buying out all the commercial time and showing a single ad for its A4 sedan. Its Super Bowl commercial this year featured the "Green Police," who arrest people for using plastic bags and Styrofoam cups. In the ad, an Audi A3 driver with a fuel-efficient diesel engine meanwhile zips past environmental roadblocks. Traffic on the brand's U.S. website for the compact car jumped 300 percent after the spot ran. The carmaker has also taken the unusual tactic of showing rivals in its ads, referring to them as "old luxury" while trumpeting Audi cars as "new luxury." "If you want to be a progressive brand, you have to be controversial at times," says marketing chief Peter Schwarzenbauer, who previously worked for Porsche and BMW in North America.
Still, Audi has a long way to go. Its U.S. sales through October were less than half those at each of its three main luxury rivals. Audi's average U.S. selling price in October of $45,185 also trailed BMW's $51,315 and Mercedes $61,340, according to market researcher Edmunds.com. Nonetheless Audi has chopped average U.S. incentives in half since 2007, to just $995 last month. Mercedes offered $3,712 in October, BMW $2,706, and Lexus $2,607. "You can't be No. 1 in the world without being successful in the U.S.," says Schwarzenbauer. "'If you can make it here, you can make it anywhere,' is still valid for me."
The bottom line: Volkswagen's Audi brand, the luxury car leader in both China and Europe, is aggressively moving to boost sales in the U.S.