By on December 21, 2009

Vorprung durch Technik. Picture courtesy rssportscars.com

When I did my first work for Audi in the 70s, competing with BMW or (gasp) Mercedes-Benz was considered a cruel joke. The brand was thought ideal for high school teachers or tax collectors, who kept their hats on while driving. What a difference a few decades make. Not to forget the money a rich sugar daddy called Volkswagen can sink into the brand.

Audi CFO Axel Strotbek told the German Handelsblatt that VW will pour €7.3b into Audi, from now to 2012. “80 percent is earmarked for developing new product,” Strotbek said. The money will go to a noble cause:

By 2015, Audi wants to be the world’s leading premium brand. That target is not overly ambitious, but ambitious nonetheless. In 2008, Audi sold slightly above 1m units, Mercedes sold 1.3m, and BMW 1.4m.

This year was harsh on anything that has “Premium” attached to it. But Audi seems to weather the storm better than the competition. Audi will close out the year over target (925000 units.) Audi wants to have a gross profit margin of more than 5r percent of revenue this year. Daimler will probably be in the reds, BMW will be lucky with a big black zero. Audi profits from its solid standing in China’s booming market. This year, they will sell 150,000 Audis in China, 2012/13 they want to raise that to 250,000 units. This will make China Audi’s most important market. Different in the U.S.A. Here, BMW and Mercedes sell three times the volume of Audi.

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34 Comments on “Audi Wants To Be World’s Leading Premium Brand...”


  • avatar
    mpresley

    I live in a downtown “yuppie” (or whatever the term is, now) area.  When I first owned Audi it was during the 60 Minutes UA era, and you couldn’t give them away.  The local Audi dealer sold (probably gave away) the franchise to an owner selling Subarus.  The franchise deteriorated badly.  Now, twenty years later, the brand has exploded.  I see more Audis than I’d ever thought possible.  I’d say they are neck and neck with BMW (again, in my area), especially with the A4 to 3 Series crowd.  I’m also encountering more higher end Audis, maybe even more than 5 and 7s.  It appears that it’s at the expense of Merc.  Not sure who is able to buy all these expensive cars, though.  They seem like young kids, to me.  Interestingly, in the low end, VW seems to be gaining traction as a “trendy” alternative to the Japanese.  I see a lot of Jedi, more Passats (but not many CCs) in the “affordable” car range.  Certainly nothing on the Japanese scale, but time will tell.

  • avatar
    wmba

    Said it before and will say it again. Back in the early ’90s, MIT published in book form a study that detailed which car companies were actually into Mass Production 2.0. Which is a combination of lean production and quality assurance methods, and which implicitly means that you do not have “inspectors” lovingly going over finished vehicles looking for flaws to fix. Because, the new method of production means you have control over the process, and don’t need to keep on checking that the vehicle is being put together properly. Cue Toyota and Honda.

    Google Quality Assurance and “car company of your choice”. Yup, Toyota and Honda have QA programs that they claim to have invented. VW has inspectors. That is quality control, not quality assurance, and is so pre WW2. MIT said the European manufacturers were 40 years behind the times in 1990. And VW, with the hubris of Piech and his gang STILL just DON’T get it. They’re just too damn smart for their own good.

    So here in North America, where VW sales are very poor, buyers already tend to reject VW for their lack of quality/reliability. So VW is going to make bland, flaccid bigger cars for North America right here. It’ll be an epic fail is my prediction.

    Audi may well become the world’s leading premium brand outside NA, where less sophisticated buyers don’t care about downtime. And anyway, their competitors are Mercedes and BMW, who also are way behind on new production processes. And I don’t mean engineering marvels like a magnesium engine block cast over an aluminum core as at BMW. I mean making really low defect vehicles, consistently.

    Ford got the QA process running pretty well years ago, and now their design side is catching up. For the future, Ford may actually assemble good designs without error, rather than crap designs without error in assembly (which were nevertheless poor design).

    GM under Whitacre? Not a chance. He’s running for the goal line with no plan in mind. Chrysler and Fiat? Well, you tell me.

    But VW will eventually fail, in my humble opinion. They are practising mass production methods not much different than those Ford invented almost 100 years ago, and just don’t understand.

    • 0 avatar
      PeteMoran

      @ wmba
       
      I’m sure Bertel will have a response, but I’m not sure which VW you believe you maybe referring to. I was present at the re-opening of VW South Africa Uitenhage (sp??) plant (after major updates/modifications) and I can tell you I saw QA every bit as comprehensive as I’ve seen within Toyota and BMW.

    • 0 avatar
      th009

      @wmba,
       
      “… outside NA, where less sophisticated buyers don’t care …”
       
      I guess only North American buyers are sophisticated and demanding of their cars, huh?

    • 0 avatar
      Robert.Walter

      wmba,

      what are you talking about?  Things do change…

      James Womack (MIT) wrote The Machine That Changed the World nearly 20 years ago.  BTW, IIRC, Womack was holding up Daimler as the (unnamed in the book) poster-boy for lousy FTT quality results and terrible logistics (i.e. anti-lean) processes, and was praising Porsche for having adopted the Toyota System (just in time to avoid one of their periodic liquidity crises).

      Womack also carefully defined what he called craft-, mass-, and lean-production, and only the weakest of automakers, with unusual market-niches or (beneficial) structural-cost positions (relative to all other competitors in the same market) can survive without using most of what was amazingly cutting-edge back when TMTCTW was written.

      I’m no great VW/Audi lover (actually have always been a Ford man), but I do recognize their product and process competence, and see using TMTCTW to make a point here as being as relevant today as the fact that my sister’s ’78 Audi Fox threw a con-rod thru the block at 60k miles … it’s just that neither are particularly relevant.

      Sure, those good ol’ boys in Ingolstadt still like their 9am Weisswurst, Senf und Bretzel, and probably always will, but they have moved so far beyond what is implied here…

      What I find more fascinating, however, is where, in the last 20 years, a young researcher working for Womack ended up … went to Ford, then jumped ship for Hyundai US, and for the last year has been the Acting CEO of Hyundai US.

    • 0 avatar
      wmba

      I do realize things change. Thank goodness. I’ve also owned five brand new Audis and was too “smart” to realize that they weren’t all that good. The last was a 1994 quattro 90, and what an unmitigated piece of crap that was, in the light of having owned Subarus since (and that company is hardly a QA standout — their Chairman recently said that the advantage of joining the Toyota Group was to be able to learn the QA process!).

      I’ve also been involved in securing accreditation to CSA Z299 standards for an electrical meter accuracy installation. This includes supplier selection and design standards, material handling, documenting (and retraining union staff who didn’t believe in the workplace revolution that was about to happen to their advantage) all workplace procedures, and the statistical evaluation of results. Then there’s the unannounced audit, where any workplace member has to know exactly what their job function is and how to do it. It ain’t easy to do this properly and takes years of preparation and planning.

      If VW had actually done all this, I’m sure they would trumpet the fact. It’s complete organizational change. You can’t pick and choose which bit of the quality assurance program you like. It’s all or nothing. And there aren’t inspectors cruising around checking quality – each person in the system is responsible for their part. Inspectors are quality control persons, not a part of quality assurance. Perhaps VW means they are performing statistical quality control on incoming supplier parts, if I’m to be kind. If I’m unkind, then VW should be “in bed” enough with its suppliers to ensure that they have viable QA systems as well, so that they know the incoming parts are decent before they arrive at the plant.

      @Robert.Walter: yes I know that Mercedes was slammed the worst by the MIT study two decades ago. VW could not have been much better. I’m glad that one of the MIT men is now a honcho at Hyundai — I’ll have to actually, rather than intellectually, consider their products in future. There must have been a sea change there, because no more than 6 or 7 years ago, production practices in Korea, as related by people who went there, were horrendous. A lot of hand work and bending sheet metal to fit. The Alabama factory may well be their breakout change.

      @th009: It has been debated in great detail in the pages of TTAC in the past, that North Americans are far more concerned about reliability as a measure of quality than Europeans, and vote by buying vehicles that Europeans sneer at and look down their noses at as being technically behind the times. That’s what I mean about being more sophisticated here. We want our cars to work.

  • avatar
    PeteMoran

    As for Audi’s claims/ambitions, I don’t care, as long as they go rallying again.

  • avatar
    Robert Schwartz

    Ugly and unreliable.
    What more could you want in a car?
    How about excessively expensive?
    Yup.

  • avatar
    Paddan

    Face it folks…Audis are nothing more than fancy VWs in the first place.  When was the last time you saw a ’70s-era Audi 100 LS or Fox on the road?  How about a ’78 – ’83 5000?  Or ’84 -’91 5000/100 or 80/90?  They are as rare as hens teeth because they began to self destruct at about 75,ooo miles just like their cheaper brother, Volksie.   I don’t see how the new ones are any different.   But kudos to VW for a great marketing campaign. 

    • 0 avatar
      Mark MacInnis

      Here in my neck of the woods (SW Michigan) I regularly see dozens of 1980′s-early 1990′s 5k’s, 4k’s, 80′s and 90′s.  Oh, and those owners see me….in my ’97 A6 Avant Quatro, which turned 136k miles yesterday…..trouble-free, safe, cost-effective, comfortable, understated miles…..

      I don’t need a propellor logo on my hood to validate me.  Just a willing, comfortable and efficient machine to take me where I need to go in elegant aplomb…

  • avatar
    mjz

    I think they have a good chance of accomplishing this. IMO Audi has superior style/design over BMW and Mercedes.

  • avatar
    Autojunkie


    If Audi can come back from the dead (i.e. Zombie Watch), then why not Chrysler or GM? Audi is a great success story and should be an example for all other automakers.

    BTW – While I do admire Audi, I’d still put my money on a BMW  :)  

  • avatar
    Jeff Waingrow

    Not everyone wants to be able to corner at 9/10ths. Some of us get by with a fraction less. For myself,  an ugly leatherette interior is too much to swallow, not to mention an exterior that is also not very easy to love. (I’m talking about you, 3 Series.) Until recently, CR had Mercedes being no more reliable than a typical Chrysler product.  I’m now on my second A4  for a total of about 65,000 miles, and not one single thing has ever gone wrong.  I think that most cars today are extremely reliable compared to ones from decades back, so to say that one model is twice as reliable as another reminds me of  claims typically coming from the medical world, to wit, that twice as many people now survive a particular disease than did with a previous treatment. Turns out sometimes that the jump was from 1% to 2%.

  • avatar
    psarhjinian

    I was present at the re-opening of VW South Africa Uitenhage (sp??) plant (after major updates/modifications) and I can tell you I saw QA every bit as comprehensive as I’ve seen within Toyota and BMW.
     
    VW’s QA problems weren’t traditionally in assembly, but much earlier on.  There was  a reliance on theory and technical excellence over practicality and real-world function.  Screwing them together was never the problem it was for the Americans (pre 1980-something) or the Italians.
     
    That said, they’re doing better.  I’d still give pause until the 5- and 7-year TCO benchmarks show up, and I’d certainly be concerned about VW’s focus on cost-cutting in the Mk6 Golf and NMS Passat, but it’s no longer quite the gamble it used to be.
     
    The other, and much more serious, problem is service.  I’m assuming VW does this better in Europe, but in North America you can trace most of VW’s perception problems straight back to the screwjob VWAG and/or VWoA does to it’s dealers on the topic of warranty work.  Audi could get a lot of traction in North America by pumping a few million into liberal warranty coverage.

  • avatar
    dswilly

    I can’t get around that Audi’s are in most cases souped up VW’s.  I agree the styling is good in most cases but the shared platform program bothers me and it’s VW’s way of chasing  Bavarian tail.

    • 0 avatar
      th009

      Most Audi platforms are not shared — apart from the A3 and TT (which do indeed share the basic platform with VW) and the Q7 (which shares the platform with the Touareg and the Cayenne), the bigger Audis all use unique Audi platforms (with longitudinal rather than transverse engines), including A4, A5, A6, A8, Q5 and R8.  Of course there are many shared components (a big reason why Audi is able to achieve those high margins) but that’s not the case for the platforms themselves.

    • 0 avatar
      CRConrad

      th009: “…the bigger Audis all use unique Audi platforms (with longitudinal rather than transverse engines), including A4, A5, A6, A8, Q5 and R8.”
       
      I’m with you on the As and the R, but it’s hard to believe the Q5 isn’t just an Audified version of the VW Tiguan.

  • avatar
    BMWnut

    It is such a pity that Audi seems to have nailed their colors to the mast of the front-wheel drive ship. In a luxury car such as the A4 or A6 it is never quite the same. A good front-wheel drive will never beat a good rear-wheel drive, no matter what. The little bit of extra interior space does not really matter in these segments.
    Yeah, sure you can have power to the rear wheels in your Audi, but only if you take four wheel drive. That comes with two extra diffs and extra drive shafts, electronics et al. Brilliant in the snow, but if you only see snow on the TV news it is of little use.
    And it’s not just me that thinks so. Mercedes and BMW have built their brands on the joys of having one pair of wheels for propulsion and another for changing direction. Toyota saw this and created the Lexus brand to cash in on this market.
    This means that I can never bring myself to put pen to paper for an Audi. Which is a pity. BMW is only starting to shake off the Bangle madness and who knows when Mercedes will reach their former glory days of build quality that was second to none. There might be a Lexus in my future.

  • avatar
    johnhender

    i have owned a 5000 -A4 2.8-A6 4.2 and currently an A8L all have been great cars except for the cost of Maintiance. it is a killer and i have been lucky nothing major has went wrong yet. i wish they were like my lexus but  they arent . i dont think they will be number one in the USA anytime soon . i dont think the Germans get it yet .i dont want to get bent over when i go in for maintiance My lexus is boring as hell but it is trouble free
    most of the people i work for have traded in their mercedes for lexus and havent looked Back My bank president was telling me how her Mercedes was driving her to the poor house. my other friend has a BMW i have yet to drive the car without some kind of service light not being on and the tires make it sound worse than my 3/4 ton truck. I love my audi but i never know what to expect. when everything is working it is the best
    i think once audi gets their relaibility up to lexus standards they will be a force to be reckoned with . As for me and audi i will have to think long and hard about another one now that the LS460 has AWD it will make the choice very hard 
    I love Audi car But i Hate the shop visits i go to a good dealership thank god it i didn’t i would be done with them  

  • avatar
    criminalenterprise

    I somehow doubt VW Group, the world’s third largest automaker, are still sticking to manufacturing philosophy rooted in the early 20th century.
     
    It sounds on its face like a good explanation for why VWs are so unreliable compared to Hondas and Toyotas until I remember that VW’s esteem in Europe is light-years ahead of its reputation here.
     
    Now VWoA may be incompetent, the dealer owners intransigent or maybe VWAG just fumbles the hand off to the U.S., but I cannot believe their production theories are penned by insular luddites.

  • avatar
    mtymsi

    Audi may accomplish their goal through sales outside the U.S. but they aren’t going to surpass MB or BMW here any time in the foreseeable future.

  • avatar
    wsn

    What exactly do they mean by “world’s leading premium brand?”
     
    Leading in sales? Then, they certainly can’t beat Toyota at that. You may say that Toyota is not a premium brand. But how much of a premium brand is Audi, when the only way to massively increase its total units sold is to dump 50hp FWD A0s to Indians?

    For me, “world’s leading premium brand” = “brand with the highest per vehicle profit”.

    Think about it, this criteria ensures that:
    1) The cars are premium, to ensure a high margin (i.e. Corolla is out)
    2) The brand sells enough cars to have the scale for that margin (i.e. Veyron is out)

    Currently, Lexus sits at the top.

  • avatar
    Steven02

    Isn’t 5% margin a miracle?  See comments here.
    http://www.thetruthaboutcars.com/reilly-sends-opel-on-mission-impossible/

  • avatar
    gsp

    I would buy Audi instead of BMW if they made real rear drive cars.  The bias even with AWD has to be at the rear or I won’t buy it.  I hold my nose and buy BMW as a result.  Nothing is more important than drivetrain.

  • avatar
    ra_pro

    To me Audi is a womens BMW, no offence intended. Looking at and driving the car I always feel that once again designers trumped the engineers. It’s a beautifully crafted, sometimes even beautifully designed automobile that just can never measure up to the BMWs although on occasion they get close or even on par (I am thinking RS4).  Many times I said to myself that perhaps the craftsmanship makes up for the lack of top driving dynamics  but in the end I just can’t do it.

    I have been looking around lately again and what surprised me was that at least in NA BMW 3-series has a better color selection inside and out than the A4 and it actually made me think that maybe the Audi design is not as topnotch as I thought it was. I mean if the company puts so much emphasis on design why not go all the way and offer a wide color selection as well? Again, I will probably stick with 335i or perhaps an M3.

  • avatar
    CarPerson

    My guess is that the Volks folks did not buy Audi to “sink money into it” but to skim profits. Sorry.

  • avatar
    Robert.Walter

    Audi countered a late ’60′s rust-bucket image (in Germany) w/galvanized bodies;
    countered a “Aschenbecker und Hutablage Serienmässig” image w/those rockin’ rallyin’ Quattros;
    and had to wait for time to cause memory to fade and a new generation of potential customers to take care of the UA debacle.

    And in the meantime, they have been steadily, relentlessly, elevating their brand, sales, and profit-margin.

  • avatar
    psarhjinian

    It sounds on its face like a good explanation for why VWs are so unreliable compared to Hondas and Toyotas until I remember that VW’s esteem in Europe is light-years ahead of its reputation here.
     
    The reason for the Europe/North America disparity is fourfold:
    1. Europeans will put up with much more crap than North Americans will.  What’s normal for a European car owner wouldn’t be tolerated here
    2. Europeans drive less and are less dependent on their cars.  Getting stranded or not being able to start, or waiting for parts is a lot less of an issue.
    3. Europeans, especially owners of luxury cars, benefit from company-provided cars to a greater percentage.
     
    All of those are related, and it is true that engineering processes do differ (the European marques have problems with platform cost and overcomplexity) but there’s a fourth ingredient: European car companies treat their North American ops and dealers like leprosy patients.
     
    You wouldn’t think this would be the case, but it’s really unsurprising how far upper management in any organization will rationalize bad behaviour because making changes means you were wrong in the first place.

  • avatar
    WildBill

    I hope the Audi is better now than they were. Do see a lot of them around Central Ohio. I agreed, in  a brain-dead moment, to sell my MIL’s Fox for her. It would actually fall apart just sitting. Something that worked fine on one test drive would have broken, failed, fallen off or  fallen apart the next time it was driven. Did eventually find a sucker to take it. Never was so glad to get that green POS out of my yard!

  • avatar
    Davekaybsc

    Audi sells a lot of FWD cars in the rest of the world, but you will struggle to find an Audi in the US that doesn’t have Quattro. The FWD thing is really a non-issue, as is the “gussied up VW” stereotype. As has already been stated, only Audi’s smallest cars use the Golf platform and VW drivetrains. I’m not really a fan of the A3 and TT for that reason. If it’s using a transverse engine and 4Motion AWD, it’s not really an Audi as far as I’m concerned.
     
    Audi has been working on fixing the excessive understeer of their cars since the last RS4, and it’s paying off. Even the regular cars now get the 40/60 front/rear torque split, the old over-the-nose engines have been pushed back into more of a front-midship arrangement for better weight distribution, and the new QuattroSport rear-dif even allows you to get the back end out if you want to. If you think the M3 is good, just wait and see what the upcoming RS4/RS5 will be able to do. 4Matic and xDrive are utter crap compared to real torsen Quattro with the new active rear diff. Only the system used in the X5/X6M comes close, but it still isn’t as good.
     
    The US luxury market is completely saturated, and also badge obsessed. That’s the only reason M-B has been able to sell so many C-classes, despite that car being basically terrible. Audi will have to pry sales away from Lexus and BMW, and it won’t be easy. Audi is already the #1 premium brand in Germany and they far outsell BMW and Mercedes in China. Lexus is a complete joke on the world stage. Even the Japanese don’t want them.
     
    From what I’ve been hearing, their quality improved dramatically starting around 2005. In the latest VDS report, they are about even with Porsche and *gasp* Honda. BMW didn’t do as well, and Mercedes was nowhere near.

    The one thing I definitely agree with is that Audi should offer far more color/trim options than they do. The UK market A6 gets loads of wheel options, seat options, and leather and wood combinations. We get practically nothing.

  • avatar
    Facebook User

    The thing that turns me off about Audi is the edgy, urban, ricer interior trim details. Both Audi and VW seem to fall victim to this urge to add some graphite composite, some brushed aluminum, a shiny chrome shift nob – which certainly appeals to the 20-somethings and early 30-somethings still trying to hold onto their 20s.
    For me, I prefer something a little more refined and elegant. Heck, even “German Spartan” is preferable to chrome and metal ricer bling.
    The LED angel eyes that Audi is flaunting throughout their line-up is a great example of this down-marketing trend to appeal to affluent young men. I was recently “buried” badly on Digg for saying that I think the Audi headlight treatment is ugly. Thing is, Digg is full of twenty-something college students who can’t afford a new Audi, so it doesn’t matter if they think the car looks cool or not, most of them can’t afford it. I can, and so can many of my peers.
    But I don’t see how they’ll ever meet their market targets if they’re not figuring out how to court the 35-55 segment of automotive buyers. The interior of the typical Audi looks more like the interior of a loaded WRX than of a typical Bimmer.

  • avatar
    Tricky Dicky

    @Psarhjinian:
    :-O (genuine shock)
    The reason for the Europe/North America disparity is fourfold:
    1. Europeans will put up with much more crap than North Americans will.  What’s normal for a European car owner wouldn’t be tolerated here – it’s amazing you can say this.
    Haven’t the D3 operated the business model for years of selling vehicles with built-in obsolescence and shitty interiors? As long as it has 500 ponies under the hood it’s good enough for the rednecks?! It seems to me that many American autos over the last 20 years are the very essence of crapness and that the D3 have been completely unable to persuade (despite lots of failed attempts), to get Europeans to buy. Or to use your words, Europeans won’t put up with that kind of crap?! Maybe you meant something different?
    2. Europeans drive less and are less dependent on their cars. (True) Getting stranded or not being able to start, or waiting for parts is a lot less of an issue
    It is if you were planning to use the car – Europeans don’t say, “Oh well, no worries, I’ll just get the train instead”. The rant and rave and jump up and down and get sweary. Public transport maybe an option in a city, but the fact that vehicle penetration rates are still very high across Europe shows that cars are still very much a requirement for convenience and cost alot of the time. So quality and reliability is still very important. If you’ve broken down next to the highway, you can’t stick out your thumb and expect a train to stop to pick you up…


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