Cruising Peachy: Inside the U.S. 2010 Audi momentum story

In selling 101,629 vehicles, Audi of America ensured that 2010 would go down as an historic year with the best performance the brand ever registered in the U.S. The results shattered the previous best year of 93,506 Audi vehicles sold in 2007.

Superlatives filled 2010 for Audi, including best-ever first, second, third and fourth-quarter sales; four record sales months in a row, and eight record-setting months.

But establishing record sales volume wasn’t the only noteworthy theme of 2010. Nearly every business measure improved, and many set new high marks, as Audi continued to pick up momentum in the most competitive global market.

“We are confident that the progress Audi has made with the American luxury car consumer only marks the beginning of our opportunities here,” said Johan de Nysschen, President, Audi of America. “Our aim isn’t sales supremacy, but to build the strongest premium brand that can be found in this market. This means improving quality, treating Audi owners as valued stakeholders and working with our dealers to deliver an Audi experience that matches the sophistication of our products.”

Here’s a deeper look at what transpired in 2010, a year of unmatched Audi progress:

Audi market share improvement and incentives
Audi gained market share the old-fashioned way – by earning it. At the close of 2010, Audi held 8.6% of the U.S. imported luxury car market, also populated by Lexus, BMW and Mercedes-Benz and others. That set a new record for the Audi brand and stood well above the 7.9% share that Audi held at the end of 2009.

But Audi didn’t dramatically increase its share through deep discounts. Based on Autodata estimates of average auto-industry discounts, Audi incentive levels fell 16% toward the end of 2010 when compared against 2009 discounts. That placed the brand on the low end of the incentives offered by a luxury manufacturer, and it was a steeper decline than average incentives extended by the imported luxury car sector overall. On average, BMW offered $748 more in average incentives, or roughly 23% more than Audi; Mercedes-Benz average incentives in 2010 were 27% higher than those extended by Audi.

“Our incentives strategy fits squarely within that goal and it furthers our intention to strengthen the business foundations of our brand,” de Nysschen said.

Breaking down the Audi 2010 market share results further reveals the brand held 9.4% of the U.S. imported luxury car market, compared to a 9% share in 2009, and 7.2% of the IHG truck market, compared to 5.9% a year earlier.

Audi dealer investment and outlook
Building the Audi brand has also meant upgrading the customer experience at the retail level where people encounter it most frequently, other than in their Audi vehicles. Building all-new dealerships off of the global Audi Terminal design philosophy, improving existing facilities or expanding space made available to the brand and its image has been a key initiative for Audi of America and its dealer partners.

From 2008 until the end of 2010, Audi dealers have invested approximately $171 million dollars on completed upgrades (not including land purchases and other expenditures). In 2011, an estimated $35.8 million worth of additional projects are scheduled to come online. During 2010, seven new Audi sales points opened in the U.S.

The level of investment by Audi dealers has been significant, especially when considering that much of it came in the midst of grave economic headwinds. But Audi dealers have expressed upbeat attitudes on the future of the brand in recent NADA Dealer Attitude Surveys. And despite the economic difficulties, their profitability is on the upswing. In 2010, the return on sales for exclusive Audi dealerships stood at a record 3.2%.

Hot spots of Audi sales gains in 2010 included: Washington, D.C., up 58% from 2009; Orange County, Calif., up 50%; Miami, up 45%; Dallas, up 37%; Seattle, up 35%; Houston, up 29%; San Francisco, up 29% and North New Jersey, up 21%

Measuring success: the Audi Q5 story
There are a couple of ways to publicly measure the success of any vehicle: Sheer sales volume and sales momentum trends. The first measure can be deceptive. A manufacturer can generate huge volumes if it has available manufacturing capacity and the appetite to crank up lavish sales incentives.

Then there is the picture that emerges with strong trend lines, where the success of the Audi Q5 crossover vehicle can be found. Sales of the Audi Q5 jumped 70.5% for the year. That ranked as the biggest sales increase in the Small SUV segment.

Strong demand left inventories of Q5 models at exceptionally lean levels. Nearly 72% of Audi Q5 models available at dealerships in December found a buyer before year end. That left only enough models to handle demand for 12 days across the country. Normal inventory levels for the auto industry range from a 45 to 55 days supply.

TDI momentum
When Audi introduced its first TDI® model in the U.S. in 2009, it was difficult to assess the American appetite for clean diesel vehicles. Unlike Europe, where diesel is often the dominant engine choice, America harbored mixed memories of clattering diesels from the past.

Funny what a difference a year makes. With fuel economy gains of up to 40% and one-third reductions in greenhouse gas emissions, U.S. consumers found that TDI provides a compelling environmental choice without any performance sacrifices. In 2010, the innovative Audi TDI clean diesel technology made up 53% of all U.S. Audi A3 sales, and 43.5% of all Audi Q7 sales. TDI models made up a solid 47.8% of the sales for the two model lines combined – a key reason why Audi plans to at least double its TDI offerings in the U.S. market in the near future. The strong U.S. demand for TDI has also proven to be significantly higher than the 18-20% sales mix anticipated just a year earlier.

Other Audi facts from 2010
- Sales of the Audi R8 supercar increased 14.3 percent to give it a 5.6% share of its segment for the year, but emerged as the only entry in it class to register a gain in sales volume.
- The Audi A6 won important comparison tests in leading U.S. automotive publications and gained nearly a full point of market share in its segment to 6.3% in 2010. Overall A6 sales rose 27.8% for the year.
- The nearly 70% increase in Audi A3 sales resulted in the largest gain for the year in its segment.


ABOUT AUDI
Audi of America, Inc. and its 277 U.S. dealers offer a full line of German-engineered luxury vehicles. AUDI AG is among the most successful luxury automotive brands globally. During 2009 Audi outsold all other luxury brands in Europe, while in the U.S. market Audi posted the largest market share gain of any luxury automotive brand. Between 2010 and 2012 the Audi Group is planning to invest around €5.5 billion, mainly in new products, in order to sustain the Company’s technological lead. Visit www.audiusa.com or www.audiusanews.com for more information regarding Audi vehicle and business issues.