Audi: Losing the Plot?

Claude Dickson
by Claude Dickson

While GM and Ford continue their slow-motion fall from grace, Audi’s headed in the other direction. The German automaker’s U.S. sales are up, moving towards record levels. The company has a raft of new vehicles on dealers’ lots and more models on their way– from mid-market entry level models to the new TT roadster to the R8 supercar. Audi’s interiors are still the industry standard for design, fit and finish. They’re modifying their distribution system to increase customer choice and reduce dealer inventories. So is all well with Audi? Yes and no.

Continuing on the yes side, Audi is poised to introduce a range of diesel powered vehicles into the U.S. market. The move comes just in time to meet pent-up demand for high mileage vehicles capable of exploiting federal “clean diesel” regulations, and may include a headline grabbing, brand-burnishing, diesel-powered sports car (the TT). At the same time, Audi has the fuel-efficient engines it needs to stay in the hunt for sales of luxury sports cars, hatchbacks, wagons and sedans.

Audi may also have discovered the “next big thing:” mid and full size hatchbacks. The American market has moved from SUV’s (with true off-road capabilities) to CUV’s (cars masquerading as SUV’s). The jump from CUV to hatchback is a logical progression (foreshadowed by the now discontinued Audi Allroad). Whether by luck or design, Audi’s ready. For model year ’09 / ’10, every model in Audi’s lineup will have a hatchback version, including their biggest model, the A8. Audi’s bread and butter A4 will be available as a sedan, wagon and hatchback. So what could go wrong?

Although Audi is well past the “sudden unintended acceleration” PR disaster that threw the company’s U.S. sales into reverse during the 80’s, reliability is the marque’s new bugaboo. While sister VW’s recent quality problems are well known, Audi owners have also been plagued with their unfair share of mechanical ailments, often without satisfactory resolution at the dealer level.

The problem is reflected by Audi’s dismal performance in JD Powers’ reliability surveys. As a direct result of these issues, Audis suffer frightening depreciation; negatively affecting leasing rates and new car sales. It’s a problem that must be sorted at both the factory gates and on the sharp end– the sooner, the better.

Meanwhile, Audi faces some important branding questions. For example, when three Audis recently received the Insurance Institute’s highest crash test rating, the company advertised the fact on TV. Since when is Audi Volvo? In fact, what is an Audi? While Ingolstadt makes some sporty cars, BWM still have that spin spun. Quality? Lexus. Prestige? Mercedes. Bargain? Infiniti. Bargain barge? Cadillac. Quirky? Acura. When you’re trying to make your move in the highly competitive luxury car market, you need to stand for something.

For years, Audi’s Quattro four wheel-drive system has been the industry leader. Audi has added the world’s slickest paddle shift/automatic transmission (DSG) to the equation. They also possess one of the best engines: a dependable and punchy four cylinder 2.0-liter turbo. If you combine Quattro, DSG and the 2.0T, you create an incredibly resourceful machine. The car can tackle severe weather conditions with confidence, deliver an exhilarating sporting experience on dry roads and waft with automatic ease in traffic. All this and entirely reasonable gas mileage.

Instead of publicly proclaiming their vague, boastful and indefensible “Never Follow” mantra, Audi should be touting themselves as master of the “practical sports sedan.” While the two-seat TT has carved a nice little niche for itself, blessing the brand with metrosexual glamour, and the R8 looks to be a terrific halo car, the company’s fortunes surely lie within its core competency: sure-footed sporting automobiles.

More specifically, Audi should concentrate on building and importing the “shooting brake” (a.k.a. sportback) concept car introduced at the Tokyo Motor Show. If Audi equipped the sportback with DSG, a 230hp version of the 2.0T powerplant (or a diesel) and Quattro four wheel-drive, they’d have America’s most versatile and practical sports car. With marginal restraint (so to speak), the sportback could generate significant U.S. profits.

Instead, Audi’s unleashed the Q7: a late-to-market, aesthetically-challenged, gas-guzzling SUV. What’s more, even though U.S. SUV sales are tanking (including arch rival Porsche Cayenne), Audi’s committed to expanding their SUV line to include the slightly smaller Q5 and smaller still Q3 SUV. The move will win few converts, dilute the brand’s message (such as it is) and distract them from their main mission.

Audi has some terrific products. But the way the company has used its tools does not bode well for their future. Audi doesn’t seem to understand its current strengths, or know how to carve-out a path to greater sales and profitability that takes advantage of those strengths. Like Detroit, Audi needs to do a little soul-searching and renew its focus on its “real” identity: fun-to-drive four-wheel drive sedans.

Claude Dickson
Claude Dickson

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  • Crackity jones Crackity jones on Aug 30, 2006

    Guys, I agree with you. You're talking brand-level stuff, which is what I think the entire post is focused on (not the merits of one particular car). Fooled..., as you say, technology is a much better platform for marketing than just quattro. The author is saying, redouble your efforts with the quattro sedan, but Audi has already done that. People need more to think about than AWD. The tech is a much bigger and more comprehensive story. (And it includes quattro as well, since they keep making it more efficient and give it a more performance-enhancing 40/60 split, etc. But it doesn't exclude FWD.) Regarding my comment about BMW. I'm not saying they're innovating. You're right there, of course. What I am saying is, BMW's positioning in the market is single-minded and rock-solid. Unless BMW completely fails, Audi CAN'T beat BMW on performance in the mental landscape of consumers. It's strategically insurmountable. So, some of the posters who have said, the RS4 and S4 are evidence of Audi can go toe-to-toe with BMW, it's just not wise to try to do that in the marketing realm. You waste your money advertising BMW. Let the dog have his bone. BMW stands for performance in the minds of 99% of the audience out there. The summation of all my comments has been, Audi doesn't have to be a hard-core enthusiast brand to beat BMW, and in fact needs a broader message to appeal to the rung below the hard-core people (and of course, get those people as well, appealing to their sense of style and technology). Have the RS4 be a halo car, but keep on your strategy of innovation, as you so rightly put it. Streets of Tomorrow is terrible, terrible. We are all in agreement, Audi's marketing is out of focus, out of date and just plain bad. As the author has said, marketing is one of the worst failures of Audi in America. Check out people who work for Audi dealerships and they'll confirm that. I do think Audi gets all the other comments we're making. They don't need advice, really. They need to hone their stylish cars to the sweet spot, which I think the RS4 shows they know how to do. The next A4 should be a very very competitive car (the enthusiasts will still whine that it isn't 1-dimensional like a BMW) but the people in the middle will love how it looks and how it drives.

  • FooledByMarketing FooledByMarketing on Aug 30, 2006

    crackity jones: I think you make a good point that BMW means performance in the minds of the public (at least in the USA). But I think Audi doesn't do enough to toot its own horn. My wife's friend bought a 3 series recently and when my wife asked why she chose a BMW, the friend said "because it is sooo luxurious." Now I'm not saying that BMW's interiors are not luxurious, but Audi is the industry standard in this regard. This is something that Audi can easily market. If they want to show why the Q7 is not just another boring SUV, then start with Audi's awards-winning interiors. You bring up the next generation A4, which is the most critical car for Audi. This car needs to be great, not just good like the current A4. From what I've read about it, they are addressing the main criticism of the current platform which is the handling and the front-heaviness. The RS4 is a huge step in the right direction in terms of handling, and when they fix this in the A4 and the other models...things will get very interesting.

  • Eric No, I just share my opinions. I have no use nor time for rhetoric from any side.
  • Redapple2 Jeez. This is simple. I 75 and 696 area. 1 nobody -NOBODY wants to work in downtown Detritus. 2 close to the tech ctr. Design and Engineering HQ. 20 miles closer to Milford.3 lower taxes for the employees. Lower taxes for Evil GM Vampire.4 2 major expressways give users more options to suburbs. Faster transport.Jeez.
  • Clark The Ring (Nürburgring) is the only race track I've driven on. That was 1985 or 1986 with my '73 Fiat Spider (and my not-so-happy girlfriend). So I made the Karussell (today: Caracciola Karussell, which I believe the author meant; there is another one: Kleines Karussell).
  • AZFelix This article takes me back to racing electric slot cars with friends on tracks laid out in the basement. Periodically your car would stop due to lost connections or from flying off the track and you would have to dash over to it and set it right. In the mean time your competitor would race ahead until faced with a similar problem. It seemed like you were struggling harder to keep from losing than trying to win. Fun times.“History never repeats itself, but it does often rhyme.” Mark Twain
  • MaintenanceCosts What Americans get told (a) vs. actual EV ownership experience (b)(and, yes, I am an actual EV owner)a. You'll be waiting indefinitely for slow chargersb. Nearly all of your charging happens while you're at your housea. EVs are prohibitively expensive toys for the richb. Fuel cost is 1/4 that of gas and maintenance about the same, with purchase price differences falling quicklya. EVs catch fire all the timeb. Rates of ICE vehicles catching fire are much higher, although the few EV fires can be harder to extinguisha. You can't take a road tripb. Road trips are a bit slower, but entirely possible as an occasional thinga. iTz A gOlF cArT!!1b. Like a normal car, but with nicer power delivery and less noise