Audi to leverage lifeline

NEW Audi Australia managing director Joerg Hofmann plans to leverage a newly created direct line of communication with the Audi AG board, an increased marketing budget, new sales initiatives and cost cutting to establish Audi as the second biggest luxury brand in Australia.

Speaking at last week’s launch of the new TT V6 coupe flagship during his first interview with Australian media, Mr Hofmann was unequivocal about Audi HQ’s disappointment with sales here since Audi Australia became a fully-owned factory subsidiary on January 1.

“It collapsed since we took over,” said Mr Hofmann in Sydney last Wednesday.

“The numbers this year were terrible – we are far below target and losing money. It’s a tough market here, but Audi is definitely not happy with sales in Australia.”

Mr Hofmann said Audi AG lost “a lot” of money in Australia this year because it:

• Had been too slow to react to aggressive 3 Series pricing from BMW.
  
  
• Lacked crucial SUV models to rival BMW’s popular X3 and X5.
  
  
• Was too slow in bringing the new A3 to market here.
  
  
• Generally did not pay Australia enough attention.
  
  

Audi Australia sales are down 20 per cent on last year in a booming 2004 automotive industry. The franchise sold almost 4500 vehicles in 2003 but expects to shift a maximum of just 3700 in its first year of factory ownership –well below its 5000 break-even figure.

But Mr Hofmann claims measures have now been put in place to slow the Australian sales slide and instate Audi as a legitimate rival for BMW, following a board meeting at Audi’s Ingolstadt, Germany, headquarters.

“Audi is a luxury or premium brand and everywhere in the world it ranks first or second in that market, so it’s not acceptable to us to be third or fourth, equal to Lexus and Volvo. The message is clear – the target is to be at least the second luxury brand in Australia,” he said.

Audi announced an annual sales target of 10,000 vehicles within five years at October’s Sydney motor show, and Mr Hofmann is confident of doubling sales by 2009 or earlier, following a short-term target of 4400 sales in 2005 and returning to profit with more than 5000 sales in 2006.

“I will turn Audi Australia around and doubles sales. I am committed to it by 2009 – we will try and make it faster but we have to be realistic,” he said.

“The five-year growth plan was established in a board meeting on Monday in Germany and there were a few good decisions for Australia. We looked at the cost side as well as the sales side. The big learning was we had to consider Australia differently – we didn’t focus on the country enough after the buyout.

“Nine to 12 months ago we made promises but we didn’t focus enough. Now we will focus our efforts and now we have the marketing budget to do it. We focussed on the US and Europe, and now we will focus on the rest of the world.

“The fact I’m reporting direct to the head of marketing on the board is different and so is the factory’s level of support. Audi Australia will be much more closely monitored and better supported – there will be more money from Ingolstadt.

“Audi bought the subsidiary and spent a lot of money on it so we cannot let it go. Australia Audi is no longer 20,000 miles away Down Under – Australia is a key part of Audi’s growth strategy,” said Mr Hofmann, who oversaw Australian Audi sales from Ingolstadt as Asia and Pacific Region sales and marketing managing director since March 21, 2003.

After starting his career with GM as Opel Asia Pacific product manager in 1996, during Mr Hofmann’s previous Asia-Pacific role at Audi he was also general manager at Audi Japan, where he increased sales volume by more than 70 per cent, from 7000 units in 2000 to nearly 12,000 cars in 2002.

In the same period, during which Mr Hofmann introduced an exclusive dealer network and aftersales progam, Audi’s Japanese market share also increased from 2.8 to 4.6 per cent.

He is adamant similar initiatives will succeed in Australia, one of which will be the employment of Australian swim star Ian Thorpe as an ambassador for Audi’s three-door A3 Sportback (left), to be released in January.

A former officer in the German army, he has spent much time in Australia, including visiting Holden’s Fishermens Bend HQ twice a year in his capacity as international project leader for GM’s Epsilon (Vectra) program.

“Japan can be a role model for Australia,” said Mr Hofmann.

“My background is sales and I know Australia so both will help. We will introduce younger and fresher advertising, and more sophisticated events including tie-ups with luxury (non-automotive) brands like Prada, Coojee or Bang and Olufsson, which worked in Japan.

“As far as I know, nobody else does it here. There will still be brand advertising but there will also be more support for dealer events.”

While Mr Hofmann won’t reveal how he will cut costs or what his new marketing budget extends to, he said he had definite plans to make changes to Audi Australia’s dealer network, which currently stands at 26 – only 75 per cent of which currently break even.

“You have to understand I cannot talk about where I will cut costs and I won’t comment on my dealer network changes, but I have definite plans. It’s more about quality than quantity – if only 25 per cent are profitable then opening more would be unwise,” said Mr Hofmann, who will meet with all Audi dealers by Christmas to fix targets.

JOERG'S JIVE

Joerg Hofmann speaks out on:

BMW

BMW is the established brand – we are the aspirational challenger. But there’s no doubt our products are even with or ahead of the competition. In all fairness, I think BMW’s engines are very good like ours, but they have no Multitronic (CVT) or quattro (AWD), though they will argue rear-drive is better.

At this level engineers are not stupid, so when you reach a level of technology you can’t improve upon it comes to the brand. People want the BMW brand so we have to bring the customer to sit down in the car, (but) I promise once they’ve driven Audi they will be convinced.

BMW dealers don’t discount because they take the long-term view.
I still have to figure out our competitors’ profit – how they make so much money.

SUBARU

I have learned Subaru has a very good brand image here. The Australian market is very price sensitive – in Japan and Germany if you price a car too low it’s not perceived as luxurious. Our engineering is definitely not cheap and this isn’t the way to go for us. Don’t you think our fit and finish is far better than Subaru?We have the best components, especially the parts you can’t see. Look what Benz did in trying to cut costs by saying we can use plastic here and there. It backfired in a big way. This is what we’ll never do at Audi. This is the message we have to convey.

We also need to make the distinction between European and German cars. Our cars are sometimes over-engineered – it’s the German approach. Japanese are different: they only bring a change to the car when it’s tried and tested and when they have to.

VW PHAETON

It’s a great car without a doubt but you have to ask the question: why are we competing with each other?

BIGGEST THREAT?

Lexus. Unfortunately Lexus is already ahead of us in Australia. I set up Audi Korea. After BMW, Lexus was our biggest rival. I don’t like the Lexus product.

AUSTRALIA

I just left the German winter so it’s not a bad change. Sydney is beautiful – I just moved into my new house in Vaucluse but my wife Heidrun won’t arrive until next year. She’s a dentist so has a few things to tie up.

From my previous visits I’ve seen many of the beautiful landmarks like Uluru and the Great Ocean Road, so it’s good to live here.