Audi ranks as Europe’s sixth-largest brand, outselling volume automakers such as Citroen and Fiat. With the forthcoming addition of the Q1 compact crossover, Audi will put even more pressure on mass-market brands. Sales boss Luca De Meo explained how Audi is maintaining its premium-ness despite its rising volume in an interview with Automotive News Europe Editor Luca Ciferri.
Does a premium car need to be big?
Not necessarily, but it helps. There are, however, examples from Audi and other brands that have successfully established premium offerings in the compact and subcompact categories, mainly for Europe. We will soon add the Q1, taking the virtues of our successful Q range into the compact segment. At the same time, as a premium brand you always have to maintain the right balance across all segments. In general, I think most premium brands in Europe are trying to increase the center of gravity of their range. At Audi, our center of gravity traditionally has been the midsize segment. We reinforced that positioning with the Q5, which we basically sell at the same transaction price as the A6.
How is Audi going to adjust its center of gravity?
The A6 is an extremely successful car and with the next generation we will make another strong statement. We have already announced a second full-size SUV, the Q8. With the new generation of the MLB architecture, we have many opportunities to not only downsize, but also to move up in size, which is something required by markets such as the U.S., China, Russia and the Gulf countries because in these markets premium is also a matter of size.
Why do premium automakers outsell many volume brands in Europe?
There are some countries such as Germany and Switzerland where premium automakers traditionally sell more than some volume players. Switzerland is a small but wealthy market and Germany is the domestic market for Audi, BMW, Mercedes and Porsche, which all sell a significant number of cars to their employees – Audi alone has about 60,000 employees in Germany – as well as to companies. Then there are countries like the UK, where high premium-car sales are partly due to strong demand from fleets.
How do you define premium?
Using numbers, one golden rule is when your net pricing is more than 10 percent higher. This is also the profitability gap between some volume and premium manufacturers. Audi’s pricing is about 10 percent higher than in the volume sector, but things vary from market to market. And the reality is obviously how much money people are ready to pay in the showroom.
Could you give an example?
The transaction price of our smallest car, the A1 subcompact, is about 23,000 euros in Europe. For that transaction price you could buy a compact hatchback from one of the leading volume automakers. But for a compact hatchback from Audi, the A3, transaction starts at about 30,000 euros.
How much of your growth in Europe is due to your model expansion?
We created products that generated demand. Take the Q5 as an example. It was a new Audi concept: big inside but relatively compact outside. The Q5 has been extremely successful and created demand. After the Q5, we knew that the same formula could succeed in a smaller format so we created the Q3. Then we added a fastback to an A4 sedan, creating the A5 Sportback, a model that sells at almost the same price as a larger A6. Why? Because this design attracted a completely different customer base, people ready to pay for something unique.
Meet the sales boss NAME: Luca De Meo
TITLE: Audi Board Member for Sales & Marketing
MAIN CHALLENGE: Successfully moving Audi into smaller segments in Europe with the Q1 while moving further upmarket in the U.S. with the Q8.
What else is driving this?
Premium brands are benefiting globally as demand polarizes between the top and bottom categories. We see the same happening in the fashion industry, consumer goods, even in food.
Is this why volume automakers are abandoning niches such as coupes and convertibles?
When the global volume is small, bearing the investment is easier for someone who commands a premium price.
A premium brand is product and…?
In this industry product is 60 to 70 percent, then you have 30 to 40 percent that is the brand and retail experience and all the rest. I think the premium experience or the premium-ness of a brand runs through everything we do.
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