Automotive News Europe - March 2, 2009 - 29

March 2, 2009 www.autonewseurope.com · PAGE 29 Audi’s tough love nets profit New bonus, margin system has helped brand’s US dealers April Wortham Automotive News Europe HERNDON, Virginia, USA Audi dealers now are among the industry’s most profitable. But Audi has traveled a “rocky road” with its US dealers, Audi of America President Johan de Nysschen says. In 2007, Audi introduced a new margin and bonus system. It required dealers to sell used cars and work harder for what had until then been guaranteed bonuses. It also raised the overall payout per car. “They thought it was very complicated,” de Nysschen told Automotive News Europe at Audi’s US headquarters here this month. “The dealers were, of course, entirely right.” ing that everything you guys said would happen has happened.’ “ In 2008, net profit at Audi’s 190 exclusive dealerships increased 30 percent, despite Audi’s US sales falling 6.1 percent to 87,760. Industrywide, sales fell 18 percent. Audi’s past policies were very bureaucratic, a criticism often leveled by dealers, de Nysschen admits. On January 1, Audi changed the way it allocates vehicles. Before, vehicles were allocated based solely on market potential. Audi’s new approach bases half of the allocation formula on dealANE er sales performance. Exclusive dealers sell more But it wasn’t wrong, he said. “It was the appropriate medicine. One of our dealers, in fact, said to me: ‘Looking back, it’s still medicine that I would like to spit out. But there’s no deny- Audi of America President Johan de Nysschen says that the premium automaker’s dealer strategy drew criticism at first, but “it was the appropriate medicine.” Rival SUVs from Mercedes and Audi have put pressure on BMW’s X3 (above). Fewer BMW X3s for the US Diana T. Kurylko Automotive News Europe Rather than slashing the price or offering incentives, BMW is limiting the supply of its Austrian-built X3 premium SUV to maintain profits until it shifts production of the model to its US plant in South Carolina. Sales of the X3 fell to 394 units in the US last month, down 64 percent from January 2008, and dealers throughout the country reported shortages. BMW sold 17,622 X3s in the US last year, down from the high point of 34,604 in 2004. A BMW spokesman said the sales drop was planned as part of an effort to limit X3 imports. Last year BMW cut its overall US allocation by 40,000 units but declined to specify how many X3s were included in that figure. Tim Smith, owner of Bob Smith BMW in Calabasas, California, said BMW has cut supply so radically that he has no X3s in stock. Strong euro hurts profits X3 profitability is a problem for BMW. The X3 is made by supplier Magna Steyr in Graz, Austria, and the strong euro has reduced profits on vehicles sold in US dollars. In 2010, BMW will begin assembling the redesigned X3 at its factory in Spartanburg, South Carolina. A BMW spokesman said the move means “changing the cost structure of the vehicle.” The base X3 costs $40,525 (about ¤32,000), including shipping. Three new entrants – the Mercedes-Benz GLK class, Audi Q5 and Volvo XC60 – are all priced at least $2,000 below the X3. In January, the average transaction price of a premium SUV was about $35,000, compared with $43,600 for the X3, according to the Power Information Network. Jesse Toprak, senior analyst at Edmunds.com, says $35,000 is usually the threshold for premium SUV buyers, “if you really want to grab people.” Said Toprak: “The price point has always been one of the weaknesses of the X3 – it really needs to be between ANE $35,000 and $40,000.”

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Automotive News Europe - March 2, 2009

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