Market Insight: Audi hesitates in march to the top

THE battle of the three German luxury car brands in Australia continues to provide a fascinating contest, with the sales gap between the trio narrowing each year and promising to be line-ball by 2014.

BMW and Mercedes-Benz have been at each other locally for decades, but the remarkable rise of Audi over the past eight years has brought us closer to what once seemed unthinkable – an Ingolstadt victory over Munich and Stuttgart.

Excluding its considerable sales of vans and trucks – which are not sold by either BMW or Audi – Mercedes-Benz has beaten BMW only once in Australia since the Bavarian brand finally ended a long run of Benz domination in 2004. At that time, Audi was only a bit player in luxury segment, selling only a quarter the number of cars as its German rivals.

Audi has been racing up since Martin Winterkorn became chairman in 2002 – when he replaced long-serving Ferdinand Piech, the grandson of Ferdinand Porsche – and appointed design chief Walter de’Silva, who introduced the current Audi look with the distinctive single-frame grille.

The Ingolstadt firm continues to benefit from Mr Winterkorn’s guidance since he became chairman of the parent Volkswagen Group in 2007.

Globally, Audi has already passed Mercedes-Benz, slotting into second place last year after posting 19.2 per cent sales growth (beating the 12.5 per cent growth figure for Australia) and setting out to dethrone BMW well ahead of its 2015 target.

In 2011, BMW held onto its title as the world’s number one premium car-maker with 1.38 million sales, compared with 1.30 million for Audi and 1.26 million for Mercedes-Benz.

Left: 2013 model Audi A3, current A4 and Q5.

In Australia, BMW posted 17,508 sales to beat Mercedes-Benz, which sold 17,006 cars and SUVs (plus 4174 trucks, buses and vans), while Audi shifted 14,511 units.

However, after seven consecutive years of growth, Audi has started 2012 slowly. Could this be the first sign of a chink in the apparently impenetrable Audi armour?While Audi Australia managing director Uwe Hagen remains confident the company will still top 15,000 sales this year to reach its 2015 target three years early, he must be concerned by a 20.5 per cent drop in the first quarter compared with the same period last year, with a 34.8 per cent fall in March alone.

Audi is looking for incremental growth from its new Q3 compact SUV, which was launched only a month ago as a serious rival to the BMW X1 and Range Rover Evoque, and expects it to steal buyers from other brands.

However, sales of the previously rampant Q5 – which averaged 233 sales a month last year as it hammered the BMW X3 – dropped to only 88 in March ahead of the Q3 launch.

This may have been a hangover from a strong 440-unit effort during Audi’s January sales month, but the X3’s sales have also risen this year on the back of a new entry-level model launched late last year and priced below $60,000 for the first time.

Audi was confident the Q3 would not steal sales from the Q5, but early evidence suggests that might not be the case. This will be an interesting sub-contest to follow as the year progresses and could be vital to Audi’s overall sales result for 2012.

If the four-ring brand fails to wring more volume from its SUV line-up – and it should be noted that the big Q7 is also down this year – then even more pressure will be applied to the A1 Sportback, the five-door version of the smallest Audi that arrives in June with big sales boost expectations.

The regular A1 has also been off the boil this year and Audi will be hoping it is simply a matter of buyers holding off for the Sportback. Having quickly become Audi’s third-best-selling model behind the A4 and Q5 after being launched in December 2010, the little A1 is vital to the brand’s ambitions.

Sales of the A4 have held firm in the face of the new-generation BMW 3 Series, even though a mid-life facelift range is due soon, and it remains Audi’s top-selling model.

The A5 has been down for a while, but was updated in February, while the bigger A6 has been a strong performer for Audi since the new model was launched last July with new front-drive four-cylinder entry-level variants.

Both Audi and Mercedes-Benz – which has been short on vital B-class and M-class supplies ahead of new model launches – have virtually conceded the 2012 battle to BMW due to the new 3 Series, recognising that the fortunes of the three German marques will in future swing with their respective model cycles, especially with the volume models.

“You catch attention with new models, but the volume section is the main thing. BMW has just launched the 3 Series and I think they will take advantage this year,” said Mr Hagen.

Audi has underpinned its massive growth by entering and even creating new niche sub-markets, so there is still plenty of new and facelifted product – R8 Spyder and RS5 coupe mid-year, S7 Sportback and S8 in October – to keep things ticking along this year.

Next year, however, Audi will get an all-new A3 small car, which was previewed at the Geneva motor show last month and arrives in Australia in the first half of 2013 in both hatchback and – for the first time – sedan forms.