Wise Audi: The New A8 Seeks Prestige, Not Big Volume

Posted by: David Welch on September 28, 2010

I sat down with Audi of America President Johan de Nysschen last week to chat about the brand’s plans for the U.S. market. As de Nysschen prepares to launch the new A8 sedan later this year, he had a few refreshing things to say. The first was that he thinks Audi should cap its growth in the U.S. He thinks that the sporty luxury brand should max out its U.S. sales volume somewhere between 150,000 and 200,000 cars - almost twice what the brand sells in a typical year but still less than its chief rivals have sold in the market. His thinking is that luxury brands can become ubiquitous and lose their cachet; the next thing that goes is pricing power. Cadillac and Lincoln both lost their luster in the ’80s and ’90s in part because they were in a mad race to sell more cars than the other. By the end of the ’90s, both brands had cars everywhere. Having fleets of Town Cars and Devilles lined up with the taxis at airports probably didn’t help. His other push is to keep moving Audi upscale.

Make no mistake, Audi wants growth. It is the top seller in Europe and China these days. In the U.S. this year, sales have surged 25%. Only Cadillac has outpaced its growth among luxury brands. But the brand would rather have prestige than gaudy sales numbers. Audi’s U.S. sales of 86,000 cars is less than half Lexus’s total. Take the new A8 that hits showrooms in November. Its starting price of $78,050 is about $2,000 more than the current car. Audi is loading up the car with a slew of new technology, like an 8-speed transmission that boosts fuel economy. The car will get 27 mpg on the highway, 4 mpg better than rival BMW’s ActiveHybrid 7i. It will also have a night vision system, a Bang and Olufsen sound system and, starting next year, a WiFi hot spot in the car. Later next year, the company will start selling the A7, a prestige coupe to compete with BMW’s 6-series.

Bottom line, the brand is moving into more expensive models, not big sellers. That’s the kind of thinking that has pushed Audi into the top tier of luxury brands along with BMW, Mercedes, and Lexus.

Reader Comments

Brad A. Bryant

September 29, 2010 6:38 PM

While I agree with the approach, it is a double-edged sword in a way. On one hand Audi will sell less cars in the US making the Audi's resale value increase, and the other hand it will price out the "Young Up and Comers" that look towards Audi as a reasonably priced, reliable, status symbol.

The article mentioned Cadillac and Lincoln, but VW also had a similar problem in the past. The market was flooded with VDubs and you could get them for little money, but whether the economy is up or down, car as still investments (bad investments, but investments nonetheless). Most people don't hop from lease to lease, the research cars based on resale, reliability, cost of ownership, and longevity. To that point, flooding the market makes the cars easy to buy new, but horribly disappointing to get rid of when you want/need a replacement.

John C.

December 26, 2010 5:00 PM

I don't care what Audi does, they are nice luxury cars but they will NEVER be able to out-compete the best in the business, which are BMW and Mercedes-Benz.

bizconnmedia

December 30, 2010 5:23 AM

That's the kind of thinking that has pushed Audi into the top tier of luxury brands along with BMW, Mercedes, and Lexus.

Prashanth

February 8, 2011 3:20 PM

This strategy if it doesnt add anything to Brand value, it at least wont diminish it. I actually think this is the way to go if you have to build a brand value.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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