Audi’s Stadler says automaker will stay focused on 2020 goals despite diesel scandal

INGOLSTADT, Germany — Audi will not adjust its key long-term goals in the aftermath of parent Volkswagen Group’s emissions-cheating scandal — a crisis that has affected at least 11 million vehicles worldwide, including more than 2 million Audis.

CEO Rupert Stadler, 52, said Audi remains focused on increasing global sales to 2 million annually by 2020 and significantly boosting its fast-growing SUV lineup by the same year.

Stadler spoke with Automotive News Europe Editor Luca Ciferri at Audi’s headquarters here last month.

Q: Audi sold 1.74 million vehicles last year and 1.5 million through 10 months this year. That suggests the goal of 2 million sales a year by 2020 is well within reach. Does Audi need to set a higher target?

A: We have to look at the global economic scenario, such as what is happening to the interest rates in the U.S. or the “new normal” in China’s growth pace. Right now, we are quite positive, so the 2020 target remains.

Audi’s 2018 U.S. sales target is 200,000 vehicles. Could that be achieved sooner?

We are at 165,000 in the first 10 months, and we are happy about our profitable growth.

We could buy market share, but this is not our philosophy. We try to limit our incentives, which are lower than those of our direct competitors. In the last five years, our dealers invested in big, exclusive flagship stores, and this will produce further growth together with our expanding model range.

What has been the effect of the emissions-cheating scandal at Audi?

We take the irregularities that have been discovered very seriously, and we deeply regret that we have broken the trust of our customers and the public. We are cooperating openly and fully with all authorities. With regard to the market, the priority now is to get in touch with our loyal customers who love their product, who are really satisfied with the product despite what happened. This is our absolute priority.

How are Audi customers reacting?

Basically they are happy with the performance and the fuel consumption of their cars. But of course, they want to have the certainty and confidence that their car or their fleet complies with all emissions regulations.

Is the scandal perceived to be mainly a VW brand issue?

We are all in the same boat, and we all will help to solve this matter together.

What is the future for diesels?

Europe is still in love with diesel. Today, close to 70 percent of our European customers choose a diesel.

In the U.S., it is a different story. The American customer loves to have good torque and a long range, but with the current gasoline price it is tough for the diesel. In China, regulators are trying to steer drivetrain technologies toward plug-in hybrids and battery-electric vehicles.

For years, Audi has been the largest profit generator within the VW Group. Will it face more pressure to deliver profits because of the costs associated with the scandal?

It is in our own interest to have the best product in the competition and to play in the Champions League when it comes to profit margin. We are working toward it, and the group knows it.

Could the diesel scandal result in more industry consolidation?

It would be too easy to say that more synergies are possible only if you put volumes together because the danger is that the car would become a commodity. Commoditizing will never be our intention because Audis are high-tech products.

We will see new players entering the industry. This proves that the automotive industry has a lot of sex appeal, also for newcomers. We are looking forward to these “new kids on the block” because competition is the name of the game.

How much volume is Audi willing to lose to maintain profit margin?

You have to fight for a good margin, and then you have to work on the right branding. Volume comes because of good preparation, which we have seen at Audi in the last 10 years. If you have the right product, good design and good technology, there is a growth pattern. If you start to make volume the priority, you sacrifice the brand value, the product or both.

What do mean when you say you want Audi to “raise the center of gravity” of its product range?

The real premium business starts with vehicles priced above 50,000 euros ($53,000), and we are preparing a true offensive in this area with products such as the new A5, A6, A7 and A8. We approved a Q8 [large SUV]. We will also add a battery-powered large SUV, which will arrive in 2018.

The battery-powered large SUV was previewed by the e-tron quattro concept. Will that be the first of many battery-electric vehicles?

We foresee more BEVs because the charging infrastructure will grow significantly in the next three to four years. The battery technology is improving substantially, and the cost per kilowatt is coming down to a level where it makes sense to push [for BEVs], at least in the premium sector.

The Q crossovers account for almost a third of Audi’s global sales. With the Q8 and the entry Q1 will it be half of all sales soon?

We aim for 40 percent by 2020. I think it is an ambitious target, but I have positive feelings because market and customer behaviors favor this type of vehicle.

SUVs often earn higher margins than cars. Are the margins for Q models in the single or double digits?

Each product has to yield a certain profitability. This includes SUVs. The fascinating thing about SUVs is that customers spend more on equipment.

What does Audi expect from the new A4?

We created an outstanding product with the new A4, adding features such as the virtual cockpit and driver-assistance systems that are new in the midsize segment [in Europe]. Therefore, the new A4 will be very competitive in Europe, where the segment is developing at a slower pace because SUVs are gaining share. It also has substantial potential for growth in China and in the U.S.

Audi sold 104,000 A3 compact sedans in the first nine months. Are you happy with that?

The car has been very well-received in the U.S., where we attract a lot of young customers from the universities. It also has been a success in Europe, and we recently launched it in China. Worldwide, about 40 percent of our A3 customers opt for the sedan, so we are definitely happy.