That 'other' Bavarian automaker

Some Audi insiders jokingly refer to the company as “that other automaker in Bavaria.”

It's true that Audi doesn't get the same level of respect at home as rival BMW. Part of the reason is that BMW's headquarters are in downtown Munich, Bavaria's capital city, and Audi is 80km (about 50 miles) north of the city in Ingolstadt.

Another reason is because BMW is the best-selling premium automaker on the planet and Audi is third (Mercedes-Benz is second).

Audi does not plan to be No. 3 for long. The company's stated goal is to become the “most successful luxury automaker in the world by 2015.”

When it announced this plan Audi was well behind the leaders in global unit sales. Through eight months of 2009, Audi has erased more than 100,000 units from BMW's lead (63,000 compared with about 165,000) and has closed within 15,850 units of Mercedes.

Punch in the stomach

Along with closing the sales gap, Audi gave BMW a punch in the stomach last week with an announcement that was largely ignored.

Starting in the first half of next year, Audi will begin selling Europe's first premium production car that emits less than 99 grams of CO2 per kilometer (159.33 grams per mile).

The A3 1.6 TDI uses 3.8 liters of diesel per 100km (61.90 US mpg).

The best BMW has to offer is the 320d EfficientDynamics Edition that produces 109g/km while using 4.1 liters of diesel per 100km.

BMW prides itself on being a technology leader. Since launching its EfficientDynamics line of low-CO2 cars at the 2007 Geneva auto show, BMW has been very vocal about the brand's superior fuel efficiency in the premium class.

Failing to reach 99g/km of CO2 before Audi will hurt.

The pain is likely to continue.

No man's land

Audi, which is part of the massive Volkswagen group, builds the A3 on the same platform as the VW Golf, Skoda Octavia and a number of other models. This leads to tremendous economies of scale.

BMW lacks this advantage, which is why we keep hearing about potential partnerships with mass-market brands. BMW will need to move down-market if it wants to remain No. 1.

There is a running joke that for many Bavarian politicians the perceived state line is the Munich airport, which is about 30km north of the city. That is a nice way of saying Audi is in no man's land.

If Audi keeps up its current pace, no man's land is poised to be home of the world's No. 1 premium brand even sooner than the middle of the next decade.

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