Audi dials back 2016 U.S. sales goal, dealer chief says

Editor's note: An earlier version of this story incorrectly suggested that Audi of America President Scott Keogh, during an interview, disclosed lower 2016 sales targets for the brand in the U.S. The new goals were disclosed by the chairman of Audi's U.S. dealer council separately.

NEW YORK -- Audi of America has scaled back its 2016 U.S. sales goals in a move company executives say aims to preserve brand and dealer health amid a broader slowdown in luxury volume growth.

The brand is aiming for 210,000 U.S. sales this year, down from an earlier target of just under 220,000, Ralph Mauro, chairman of Audi’s U.S. dealer council, told Automotive News.

“They want to match demand and supply and they want us to have ‘one too few’ so we create an environment that helps the dealers get back to the profitability levels that they’ve had in the past,” Mauro said.

In an interview here, Audi of America President Scott Keogh declined to address the revision directly and said Audi adjusts its planning to account for changing market conditions.

“I think what happened is what I would call normal business at Audi,” Keogh said.

Keogh said U.S. luxury auto sales will cease growing at the rates seen in recent years, when they’ve outpaced U.S. auto sales overall. Audi expects total U.S. luxury auto sales to grow by 2 percent to 3 percent in 2016, Keogh said.

“We adjust accordingly with, obviously, dealer profitability in mind and a healthy business model in mind,” Keogh said. “We want to behave properly in a marketplace growing at that rate.”

Luxury slows

According to the Automotive News Data Center, luxury brands saw sales decline 1.5 percent in the first two months of 2016, while Audi posted a 2.5 percent gain in the same period, which Keogh says will continue.

Audi is armed with a busy product launch schedule this year, including high-volume products such as the redesigned Q7 crossover and redesigned A4 sedan launching now.

Those are among the 12 new or updated vehicles Audi will launch over the next three years to continue its growth path in the U.S.

“We outperformed the market last year, and we’ll outperform the market this year,” Keogh said, noting that Audi expects to set another U.S. sales record in 2016.

Dietmar Voggenreiter, Audi AG’s board member in charge of sales and marketing, said in the joint interview with Keogh that matching supply to demand is a key for customer satisfaction, for which Audi was recently named the No. 1 luxury brand by J.D. Power and Associates in its most recent Customer Satisfaction Index.

“One of our key targets is to have really healthy growth on the company side and on the dealer side, because only with a healthy growth situation do you have at the end a high customer satisfaction,” Voggenreiter said. “I’m really happy with [Keogh] and his team.”

Old lineup

Audi’s market-beating 2015 sales growth came despite a lack of high-volume product launches and one of the oldest lineups among luxury brands.

Those factors contributed to a reduction in new-car gross profits and dealer profitability overall as dealers pushed to maintain Audi’s U.S. sales momentum last year and surpass 200,000 sales for the first time, said Mauro, who is president of International Autos Group in West Allis, Wis.

“We sacrificed some gross profit to get there, which led to a lesser return on sales than we’ve had in some of the recent years, but I think it was the right decision for the dealer body and the right decision for Audi,” Mauro told Automotive News. “I think it puts us in a great place moving into 2016 with the product launches that we have in front of us.”

Rebuilding margins

While Audi dealers are still “extremely profitable,” Mauro says, Audi dealer profits fell last year to below a 3 percent return on sales after topping that mark at the end of 2014.

Mauro says Audi executives’ commitment to reducing inventories overall, while boosting availability of the hottest, most-profitable vehicles, will help rebuild dealer margins.