Audi’s presence in the U.S. gets stronger year after year. In the past decade, the automaker went from selling some 80,000 vehicles annually to selling more than 200,000 vehicles last year. Its market share gets bigger as consumers flock to the German brand, buying cars like Audi’s best-selling Q5. Audi also just opened a new 3,300-employee factory in Mexico to build the all-new Q5—a big debut at this year’s Paris auto show—which should dramatically cut down logistics and transportation costs for U.S.-bound cars. It’s a solid start to the next four years, during which Audi will invest $1 billion into its nationwide dealership network, hoping to turn today’s 96 Audi terminals into 177 terminals. We figured now would be a good time to check in with Scott Keogh, president of Audi of America, to see if he could tell us more about Audi’s ambitions.
AM: Can you break down your $1-billion investment? Where is all that money going?
SK: That is purely dealership investment, like building new facilities and upgrading facilities. It’s mostly happening down south. We’ve historically been very underrepresenting in places like Texas and Florida and that. Audi came of age in the Northeast and Northwest—we’ve always had high share and high penetration up there—but these other markets…we’d have 15% share in Denver but 6% share in Dallas. As America changed and those markets got gigantic, we had low share in those big markets.
AM: Other markets we’ll see change?
SK: Philadelphia. If you go back three years ago, there wasn’t a single covered service drive [in Philadelphia]. Everything was a parking lot and you’d go walk into the dealership—as you know Philadelphia is a cold market. Fast-forward to today, and we have all brand-new stores and 18 percent of market share, one of the best we have in the country. We’re ahead of Lexus in that market.
AM: Is some of that $1-billion investment going to push Audi Sport in America?
SK: A small portion of that. Right now we have 292 dealers across the country, and I think 176 signed up to be Audi Sport dealers. Basically, Audi Sport is an exclusive area within the existing terminals. There was an investment but we’re talking tens of thousands of dollars. You have one person in the dealership who is your dedicated Audi Sport person and you have a wing in a dealership. We’ll expand it as we go. This will all launch next year.
AM: Audi has done well getting conquest buyers, but now it not only needs more to conquest buyers to increase market share but also solid client retention. How do you plan to do that?
SK: You’re exactly right. Now we have to get into a loyalty game. We are treating customers better. They come into beautiful waiting rooms, get great service and amenities, and I think we’re going to do well with loyalty. In the conquest area, we need to gain markets where we’ve been historically weak, like Houston and Dallas and California.
AM: Let’s turn to product: How do you speak internally about segments? You’re often saying a car “straddles” a segment, alluding to size, but do you think as more and more automotive “gray space” is filled with new vehicles, you will start focusing more on price or features or what?
SK: The four big segments we keep discussing (A4, Q5, A6, Q7) basically sell about 80 percent of our cars. If you look at how consumers shop, it’s not as chaotic as you’d think. It’s relatively clean, for the most part. But the world doesn’t work in tight little boxes. Frankly that’s something we’re looking at all the time. It’s the gray area that led to a car like the A7.
AM: And the Allroad, too. Where is the next gray space where you can have success?
SK: In terms of the next big thing we’re looking at is the all-electric SUV, which we will launch. If you look where this car migrated from, it started as a European city car, then became a sedan Sportback thing, and then we pushed very aggressively to make that car an SUV. Why? One, that car is going to hit the most giant segments. Two, SUVs package quite well as BEVs. And the biggest thing we wanted was to get mainstream adoption. Roughly, size-wise, that vehicle is between a Q5 and Q7, and to me that’s a smart way to go.
AM: When might we see something about that SUV?
[Audi representative chimes in to say, “Spring next year.” It will be launched after 2018.]
SK: We’re working on it aggressively.