Join Date: Nov 2004
Audi Cuts A6 Price as Lure for U.S. BMW-Mercedes Drivers:
Volkswagen AG (VOW)’s Audi, the luxury brand trying to double its U.S. sales, has lowered the sticker price of its redesigned A6 midsize sedan to grab more market share.
The new A6, now in its first full month of sales, starts at $41,700, the company said on its website, down from $45,200 for the previous model. Bayerische Motoren Werke AG (BMW)’s 5-Series line, which outsells the A6 almost fivefold in the U.S., starts at $45,050, and Daimler AG (DAI)’s Mercedes-Benz E-Class sedans start at $49,400 and outsell the Audi model almost 6-to-1.
Volkswagen aims to double luxury sales in the U.S. to 200,000 -- in league with BMW, Mercedes and Toyota Motor Corp. (7203)’s Lexus -- by 2018 as part of its plan to become the world’s biggest automaker. While the compact A4 cars and Q5 sport- utility vehicle accounts for half of Audi’s U.S. sales, boosting sales volume for the A6 will increase exposure of the brand to influential consumers beyond its full-size A8 and stretched A8L.
“People observe what these wealthy and discerning individuals drive,” Johan de Nysschen, head of Audi in the U.S., said in an interview. “It’s an important part of the brand development.”
While Audi sells fewer vehicles than the top luxury brands, it has narrowed the gap. Five years ago, Audi deliveries totaled 90,116 cars and SUVs in the U.S., while the other three brands sold 247,973 to 322,434.
BMW, poised to become the top-selling luxury auto brand in the U.S. this year, and Mercedes “are vastly outperforming” Audi in the midsize segment, said Tom Libby, an auto-sales analyst with Woodcliff Lake, New Jersey-based R.L. Polk & Co.
‘Need to Improve’
Audi sold 8,006 A6 sedans in the U.S. last year, trailing the 38,700 5-Series and 46,900 E-Class sedans sold. Sales of the outgoing Audi model, last redesigned in 2005, have increased 0.9 percent through July, while deliveries of E-Class sedans rose 8.4 percent and 5-Series sales jumped 65 percent.
“If they want to get to their goal of being the No. 1 premium brand, if they want to get to the goal of 200,000 units in the United States, obviously they need to improve in that segment,” Libby said.
Audi accounts for a quarter of U.S. sales by Volkswagen, which aims to be the world’s biggest and most-profitable automaker by 2018. Last year, VW ranked third, about 1.2 million deliveries behind Toyota and General Motors Co. Through the first half, it trails GM by about 400,000 sales and leads Toyota by about the same amount.
The lower sticker price on the new base A6 means the automaker shouldn’t have to rely on subsidized lease offers to lower payments. Selling without big discounts will improve impressions of the brand and model over time, said Polk’s Libby.
“You can’t keep being a quote-unquote deal product and expect to establish yourself in those upper price-range segments,” he said. “You need to reposition and slowly rebuild it.”
Audi’s efforts to become more premium have raised the average transaction price of its brand by $5,000 over the past three years and taken new customers from competitors, de Nysschen said.
The new car, which can come with features such as night- vision assist and a mobile Wi-Fi hot spot, is winning praise from critics.
“The A6 blends everything together into a symphony of driving fun,” wrote Scott Burgess of the Detroit News. “This A6 will make many trips more interesting than the actual destinations.”
Audi’s integration of technology, including self-parking and the Google Earth mapping system programmed into the navigation screen, may help it attract luxury customers who often want the latest gadgets, said Jeremy Anwyl, head of Edmunds.com, a Santa Monica-California-based website that tracks auto sales.
“Nobody needs to spend that kind of money on a vehicle,” he said. “They’re doing so because they want to. A lot of it is a statement. From the technology standpoint, it’s the cool factor.”
Sales of the previous A6 were improving as the brand set a U.S. record last year, said Joel Weinberger, who owns an Audi dealership in Naperville, Illinois, west of Chicago.
The new “A6 is going to continue to ride that wave and be able to expand that market,” he said. “It’s a 5-Series and E- Class fighter.”
The A6 along with the larger A7 and A8 sedans and Q7 SUV are part of an effort to woo more wealthy customers. By next year, de Nysschen said he wants those models to consistently account for 30 percent of deliveries, up from 18 percent last year. While Audi has reached that mix in some months when supply of A4 compact cars has been limited, he aims for more sales of all models.
U.S. sales of the redesigned A8, introduced last year, rose to 3,300 through July from 473 a year earlier. The new A7, which went on sale in April, has already sold 2,701 this year.
“The A6, of course, is an extremely important part of our strategy to raise the center of gravity of the brand moving forward,” de Nysschen said.
Audi has taken 850 dealer employees to Germany for training and 1,000 more have attended special sessions in the U.S., he said. Over the next 18 months, an additional 4,000 people will go through the program, which includes customer service and hospitality training.
“It’s an area that I think is especially important as we seek to expand the number of these high-end and discerning and obviously demanding customers,” he said. “They arrive with a different expectation set perhaps than what our dealers have been accustomed to in the past and we need to respond to this.”
It was a lackluster dealer experience that nudged Ryan Waid into a BMW 5-Series instead of an Audi.
“The service at the BMW store has been fantastic,” he said. “That’s one of the reasons why even if I really consider Audi it would be hard for me to leave BMW.”
Still, he’s willing to give Audi a try. His three-year lease ends next year and he’s interested in the A6 because of its more aggressive exterior look, said Waid, 37, a lawyer who lives in Harrisonburg, Virginia.
“I’ve been impressed by the reviews I’ve read.”