Beginning in 2005, Audi of America Inc. will reward dealers with $750 per new car and certified pre-owned car sold in exchange for building exclusive dealerships.
They also could earn lesser reward levels for partial exclusivity, such as a separate Audi showroom but shared service department with another brand.
Dealers were informed of these terms of trade at the Audi make meeting.
The financial reward will remain in place for three years, said Bill Hoehn, chairman of the Audi National Dealer Council.
"It's a major change in the relationship between factory and dealer," Hoehn said.
Currently, Audi dealers are rewarded for exclusivity based on sales, customer satisfaction scores and other complex performance measurements.
"For the last 10 years, we were performance driven," Hoehn said. "It was an unwieldy maze of programs. Audi dealers believe that the current criteria are somewhat arbitrary and changed annually. In 2005, it will be simplified. Audi has made a clear decision to change direction and base it on the dealer's investment."
The consensus at the make meeting was that the new reward program will treat dealers as partners and as adult businesspeople, he said.
Audi executives used the make meeting to inform dealers a year in advance of the changes so that they have time to consider at what level they want to participate.
In addition to the $750 level, Audi dealers can choose to invest in two lower levels. Requirement for the $450 reward per car would include a separate Audi showroom and dealership employee training. The $300 level is the smallest reward per car and mostly involves training.
During the make meeting, the Audi dealers gave Len Hunt, the outgoing head of Audi of America, a standing ovation.
Hunt will become vice president in charge of the Volkswagen brand in the United States effective March 1. He replaces Frank Maguire, who is retiring.
"There was a tremendous amount of appreciation for the enthusiasm and passion that Len Hunt brought to Audi," Hoehn said.
Some dealers are apprehensive about Hunt's replacement. There is fear that Axel Mees, the BMW executive hired to replace Hunt, "won't be as strong a spokesman for the brand in the United States," Hoehn said. "But it's too soon to say. We're looking forward to meeting him."
Dealers also heard about new products on the way, including the redesigned A6 in October or November, the redesigned A4 in February 2005, the A3 in May or June 2005 and the Pikes Peak crossover vehicle in early 2006.
Dealers learned that Audi will sell fewer A4 models to dealers in 2004 to try to bring down inventory levels. High inventory levels in 2003 reduced dealer margins.