Audi of America finished 2011 with its best U.S. sales year. But for 2012, Audi dealers are setting their sights even higher.
They'll get some help with a full year of sales of the redesigned A6 and new A7, which went on sale last spring.
Audi also plans to sink more money into advertising and cars to U.S. dealers, said Jack Hanania, outgoing president of the Audi National Dealer Council.
"Our sales volume is going up, and we expect bigger profits in 2012," Hanania said. "But again, we've got to get the volume. We've got to have the inventory. There is more pressure on dealers today to meet customers' expectations than ever before."
Supplies will remain tight, and Audi dealers are running short of many popular models, including the Q5 and Q7, he added. The economic volatility in Europe, where Audi builds its cars, is giving some dealers jitters, Hanania added.
Still, Audi is on a roll. Last year, the premium brand sold 117,561 vehicles in the United States, up 16 percent over 2010. That has put Audi firmly on track to meet its long-term target of selling 200,000 cars a year by 2018.
Hanania, who owns six dealerships in Jacksonville, Fla., spoke with Staff Reporter Christina Rogers.
How was 2011 for Audi dealers?
We again broke a brand new milestone in volume. Profit continues to grow at Audi dealers. The brand continues to grow. The cost of doing business continues to grow. When you increase your volume, there is a cost to that. We're adding people.
What are the big issues for Audi dealers in 2012?
The concern is just watching what happens in Europe. It's kind of a moving target. It could affect our business plan because our inventory comes from Europe. Right now, our product is a hot product. The demand is out there for Audi. We just need the inventory. We need the hot-selling models that meet customer demand with the right trim levels.
Our Q5 is still in demand. It's one of the hottest products in the Audi lineup and we haven't even started to reach what we could reach in volume on the Q5 segment.
How do the problems in Europe affect you as a dealer?
Our cars are built in Europe, and if there is an economic meltdown in Europe and they start cutting production, it could affect our inventory.
We have to make sure what happens in Europe stays isolated and doesn't affect America. The top executives at Audi of America have taken this brand to a level that Audi has never experienced before, and so we want to make sure we're getting the support from Europe. We just don't want any interruption in our business plan for 2012.
Given all the uncertainty in the European economy, does it make sense for Audi to move some production to North America?
That's something Audi AG has to look at and decide what fits their business plan. Look at Volkswagen. I know when Volkswagen started building cars in Chattanooga, the volume went up. From a dealer point of view, we'd like to see Audis built in America for America. You don't have to be concerned with the exchange rate. You're on the same playing field with the other luxury nameplates that build cars in America.
We can meet the demand of our clients much better. When you're building them in Europe and shipping them here, there is a lag time. And in today's environment, it's a competitive market and we need to be able to deliver.
Last year you talked about needing more vehicles to keep up with demand. How are inventory levels now?
We continue to struggle with our inventory. It's been challenging for 2011. It's been tight. The days supply has been very low, in the single digits on some models.
The Q5 continues to be low. The Q7. And, of course, the TDIs.
What have Audi executives told you about allocating more cars to North America?
We sold more cars in 2011 than we did in 2010. And we sold more in 2010 than 2009, so that means we're getting more cars, but is it reaching the demand of the market? No.
The pressure continues on dealers to get more cars and the pressure continues on Audi to get us more cars. But the brand is hot around the world, so they have bigger challenges around the world.
For 2012 I know the number is going to grow again, and hopefully that will get closer to demand. As our volume grows, our awareness grows. It's going to be interesting to see how Audi deals with it for 2012 and 2013.
Are you hearing from dealers that they're losing potential sales because of the shortfall?
Yes, I am. Dealers have brought it to our attention in 2011 that they've lost sales due to the lack of inventory.
What are Audi's inventory plans in 2012?
We foresee continued inventory constraints as Audi remains hot all over the world. The factories are running at full capacity. Our high-volume lines -- the A4, A5 and the Q5 --will receive a freshening in 2012, which would also lead to lower inventory and put more demand on the lineup.
What is the sales target for 2012?
Audi plans to continue growing volume and gaining market share. We're confident about cracking another year in record sales. We came in at 120,000, but I think we'll bust that. We'll benefit from a full year of the A6 and A7, and a new trim level offering on the A8.
What models are attracting buyers into showrooms?
The whole lineup is attracting buyers. The lineup is fabulous.
Audi sales are on the rise. What percentage of those buyers are coming from other brands? And which brands are they coming from?
We're getting a lot from BMW and Mercedes. We get cross-shopped with Lexus, Infiniti and Acura. We trade more BMW than any other brand.
Audi started selling its first hybrid in 2011. How are sales so far?
Good. People are being more eco-friendly and green than ever before. Are we hitting our sales target for the hybrids? We need more. Unfortunately, we haven't had the inventory.
How do customers feel about the A3 hatchback disappearing in 2014? How do you think the soon-to-arrive A3 sedan will be received?
I personally like the car. It's a fabulous looking car. It's a dynamic looking car. It's got great body style. I'm excited to bring it into the lineup. When it comes in, dealers will love it and that's where it starts from. We're customers, too. It's going to be a great addition to our lineup, and it's going to do great things for the Audi brand.
Do you think Audi will sell more sedans than hatchbacks?
I think so. I think there'll be a lot more sedans sold in that car than hatchbacks. Overall, there are hatchbacks out there, but they don't typically have strong sales numbers in America. Having the A3 sedan is going to expand our volume. The car has great styling to it, great appeal.
How is Audi doing on marketing and advertising resources?
The marketing has been fabulous. Their presence in the media and the way they have gone about it has been fantastic. Generally, all the dealers across the country have been pleased. The Super Bowl ads have been fantastic. They've won all kinds of awards. And throughout the year Audi has become more involved with sports. They've also been doing different kind of sponsorships.
How does Audi's spending on advertising compare with other luxury brands?
I think Audi does a great job in advertising the brand. They continue to grow every year. They have not cut back. They spent more money in 2011 than they have done before, and in 2012, they're expected to spend even more money. They spent a lot of money on the launch of the A8, and they're continuing to spend more money on the A6. What's been impressive with Audi is the launches of the new models have been tremendously successful.
What are Audi dealers doing to attract service business?
We have a service reminder system that predicts the actual mileage of the customer's car and sends a reminder e-mail and first-class letter to the customers. We're behind this. The dealer council, when I was president, worked with Audi of America to put this in place. We also have four mailers a year, which are done quarterly, with service or accessory specials. The specials are seasonal, like in the summer we'll have one for AC.
We also increased marketing of Audi Care. People who purchase Audi Care are much more likely to return for scheduled maintenance.
Last year you said Audi Financial was working with dealers to increase residual values. What improvements were made in 2011?
The residual values of most Audi models have improved 3 to 4 points. This includes the A3, A4, A6, A8 and Q5. The Q7 improved even more. That segment has strengthened considerably.
The strength of the A5 had already been priced into the model year 2011, and we foresee still an increase in model year 2012.