Audi's $66,000 A7 to Challenge BMW, Daimler for Luxury Lead
Audi's new A7 Sportback
Audi via Bloomberg
The new A7 Sportback five-door car, seen here, Audi’s first model in a new product class combining sportiness with the top-end A8’s spaciousness, will compete with BMW’s 5-Series Gran Turismo and Daimler ’s Mercedes-Benz CLS.
The new A7 Sportback five-door car, seen here, Audi’s first model in a new product class combining sportiness with the top-end A8’s spaciousness, will compete with BMW’s 5-Series Gran Turismo and Daimler ’s Mercedes-Benz CLS. Source: Audi via Bloomberg
Audi's Chief Financial Officer Axel Strotbek
Guenter Schiffmann/Bloomberg
Audi's Chief Financial Officer Axel Strotbek told reporters, “We’re pushing into customer groups that are willing to pay more for their car, and that’s where the A7 will play an important role.”
Audi's Chief Financial Officer Axel Strotbek told reporters, “We’re pushing into customer groups that are willing to pay more for their car, and that’s where the A7 will play an important role.” Photographer: Guenter Schiffmann/Bloomberg
Volkswagen AG’s Audi brand will target families looking for a sportier car with the new A7 Sportback as the automaker aims to leapfrog Bayerische Motoren Werke AG and Daimler AG in luxury car sales.
“We’re pushing into customer groups that are willing to pay more for their car, and that’s where the A7 will play an important role,” Chief Financial Officer Axel Strotbek told reporters at an event on the island of Sardinia late yesterday. “It’s clearly going to help us with our profitability.”
The A7, which goes on sale in western Europe at the end of October for 51,650 euros ($66,000), will help Audi lift sales in the compact and mid-size segments to 400,000 vehicles in 2015 from 250,000 this year, Strotbek said, declining to give the A7’s sales target.
The five-door car, Audi’s first model in a new product class combining sportiness with the top-end A8’s spaciousness, will compete with BMW’s 5-Series Gran Turismo and Daimler’s Mercedes-Benz CLS. The Ingolstadt, Germany-based carmaker has a goal of toppling BMW as the biggest luxury-auto maker in 2015.
“This will be a highly profitable product that can lift up Audi’s entire line-up,” said Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt, who has a “sell” rating on VW shares. “The mass production facilities offered by VW help on the cost side and bring a big advantage against BMW and Mercedes. Audi needs that because they don’t yet have the pricing power of their two competitors.”
Eight-month deliveries rose 18 percent to 726,590 vehicles, Chief Executive Officer Rupert Stadler said at yesterday’s event. Sales through August are 8 percent above the 2008 level, Audi’s previous best sales year, he added. August sales gained 22 percent, Strotbek said.
Filling Niches
Audi is building cars aimed at more specific market segments in order to appeal to a wider group of potential customers. The A7 fills a niche for people who are looking to take along their families and luggage, while at the same time seeking athletic appeal, spokesman Eric Felber said.
The manufacturer is introducing a dozen models in 2010, including the A7, an updated A6 and the A1, its smallest car, as the automaker increases the lineup to 42 vehicles by 2015 from 34 in 2009. The carmaker is spending 7.3 billion euros to upgrade factories and develop new cars through 2012.
“This car, together with the A1 and the coming A6, will provide us with thrust for growth like we’ve never had before,” Stadler said.
Audi forecasts record sales of more than 1.08 million cars and sport-utility vehicles this year. BMW in July raised its 2010 sales forecast by 100,000 vehicles to at least 1.4 million, while Mercedes is targeting sale growth in a “double-digit” percentage in 2010 from last year’s 1.09 million cars and SUVs.
Lighter Model
Aluminum parts will make up 20 percent of the A7, reducing its weight by 15 percent, Felber said. Some parts that aren’t important for style or performance are shared with other Audi and VW models, he said. The A7’s start dates in China and the U.S., the world’s two biggest auto markets, haven’t been determined yet, he added.
“You can never exclude the possibility that they’ll prey on their own models,” said Daniel Schwarz, an analyst at Commerzbank AG in Frankfurt who recommends investors buy VW shares. “But at low marginal cost it’s better to prey on yourself than have BMW or Mercedes do it.”
The car borrows features from the A8, including optional on-board Wi-Fi which lets users connect devices like Apple Inc.’s iPad tablet to the internet. Buyers can also upgrade to a display which shows road information on the windshield. Interior options include wood resembling ship planks.
“Finally, there’s a car where you stand in front of it and can say nothing but ‘Wow,’” said Fabrice Kuebart, who’s in charge of corporate customers at the Autoschmitt dealership in Frankfurt. “At the same time, you’ll have no trouble fitting two golf trolleys in the trunk and there’ll still be loads of space.”
To contact the reporter on this story: Cornelius Rahn in Sardinia via crahn2@bloomberg.net
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