Executive Speeches
21 April 2009
Johan de Nysschen Speech to Automotive Press Association
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Good afternoon ladies and gentlemen. It is a privilege to meet with you today amid the historic and perilous forces changing the industry. I don't need to tell you that these are tough times. Your thorough and professional approach to news regarding the automotive industry paints that picture for me, and an anxious world, every day.
I'd originally intended to talk with you about the Audi strategy to significantly raise our profile in the U.S. market by 2018 – a goal fueled by our plans to expand our global lineup to 40 vehicles.
But since this is the heart of the U.S. auto industry and since so much uncertainty surrounds us, I'd like to present a different message.
What I offer is a voice of measured optimism that American consumers are poised to buy. Whether its homes, new cars or necessities, consumerism is indeed alive.
Americans may be keeping their wallets in reserve or holding back from signing on the dotted line for a variety of reasons. But based on what I have seen, consumers are out there kicking tires and window shopping. From my vantage point, it is not a question of if, but when, buying power will bounce back in this country.
Certainly we will see mixed economic signals for sometime still. The government last week said retail sales were weaker than economists and analysts expected. A couple of days later came data showing unemployment claims dropped and that single-family home starts seemed to have found some equilibrium. Foreclosures are up nationally, but so is mortgage refinancing.
Those of you who know me recognize that I'm no Pollyanna. The auto industry – and the American economy overall – will face more contraction and realignment. We'll still need to grow accustomed to uncomfortable realities, such as further layoffs, bankruptcy lawyers and probably even deep government intervention across broad swaths of our business.
Yet signs of a very real pulse are out there in the market. It may be faint in places, but it's there. Just last week, the Federal Reserve noted in its Beige Book survey of American business that nearly half of its regions were stabilizing, though at low levels for now. The same report found "slight improvement" in retail sales. And Fed Chairman Ben Bernanke said he's seeing signals that we may be climbing out of the deepest recession since World War II.
At Audi we are observing similar patterns. Traffic in our dealership showrooms is up 8.4 percent from a year ago, even as U.S. sales have declined across the board for luxury vehicles. Sales leads that we collect online jumped 67 percent last year from a year earlier. And Audi Internet leads for all of 2009 rose a solid 17.5 percent from this point in 2008.
All of this all tells us that consumers are deeply interested in new cars …. They just aren't quite ready to take that plunge. There seems to be several reasons for this. Lining up adequate financing still isn't an easy thing for consumers due to constrictions in the global credit markets. Consumer confidence in the path ahead remains shaky at best. We also believe that the stresses roiling many automakers have convinced car buyers to simply hold out for ever sweetening deals and discounts.
Which brings me to a key point about the Audi approach to these turbulent times. We have not been – and will not be – willing to buy sales with bloated incentives. Experience has shown this is a slippery slope that leads some luxury car brands into a dependence on customers who financial history makes them marginal long-term purchasers of high-end vehicles.
At Audi, our incentives have actually declined 6.3 percent in the face of weaker demand, while most of our competitors have piled on more discounts. Incentive offers on Lexus models are up 125 percent so far this year. Mercedes-Benz discounts have jumped 55 percent. Infiniti's are up 70 percent. BMW's jumped 15 percent just last month from March 2008.
Now I can't claim to be an oracle with knowledge of when consumers will spring into action. We simply believe that Audi is uniquely positioned to not simply emerge from this crisis, but to emerge with greater relevance to the America luxury car consumer. Over the past several years we have taken steps to prepare for times like these. It's not secret, this is a cyclical industry, and we've done our best to be positioned for the downturn.
At Audi, we also have a vision for the auto industry's future. Part of that vision starts later this month as we launch the first TDI clean diesel vehicles in the United States. I will delve into why TDI is so important in more detail, but the future of the car industry rests on clean and efficient vehicles and I'm excited that another demonstration of Audi progress will soon be available to U.S. drivers.
Our philosophy at Audi is to push forward with long-range plans that call for that exceptional growth through 2018 that I referred to earlier – and to capitalize on the momentum our stable of new products has provided in the short term.
This past year, Audi turned in record profits of $2.81 billion. That marked the 13th consecutive year of record profits, in fact. 2008 was also our 13th straight year of record-setting global sales. Worldwide we surpassed one million units sold for the first time.
Here in the United States, I am proud to say that Audi stood apart as the only luxury brand with an increase in car sales last year.
Unfortunately, we were not immune to a 50% contraction in the market for SUV's and so total sales were about 8% down, but significantly out-performing the market. On top of that, our pre-owned vehicle sales in the United States set a new record last year, with an increase of 18.6% over 2007.
Clearly new products are at the heart of our success, but I also believe that with these products consumers are becoming far more aware of Audi and they are appreciating the innovative directions our brand demonstrates in the market.
"Units sold" can never tell you the full story of Audi and therefore we are not in the business of sacrificing quality to boost sales numbers. No, a greater indication of Audi's presence in our market is our connection with our customers, which has significantly increased as of late to reach the highest levels in our history.
Entering this year, the public's awareness, opinion and consideration for Audi were all at record levels. Our consumer awareness jumped 8% last year and consideration for Audi vehicles grew by 7%. Most importantly, drivers' opinion of Audi as an "excellent" brand reached is its highest level in our history.
So perhaps it's not surprising that our share of the luxury vehicle market continues to climb. Nearly every month in 2008, Audi increased its market share – resulting in a jump of almost a full percentage point for the total year. It's a trend that has carried through in 2009. In March, our share of the U.S. imported luxury car market stood at 7.8 percent – an increase of 1.3 percentage points since March 2008.
We entered this year with an aggressive marketing strategy, despite the economy. We secured unprecedented sponsorship of the news coverage during the Presidential Inauguration in January, sharing the historic moment with over 111 million viewers online, on television, and newspaper readers. We followed that with an eye-catching and entertaining Super Bowl ad that reached nearly 100 million viewers.
And we're not letting up. This year, we will launch seven new models, to further add to the appeal of the product portfolio which is the envy of our competitors.
- A6 PI (1Q2009)
- Q5 3.2 quattro (2Q2009)
- Q7 TDI clean diesel (2Q2009)
- S4 (3Q2009)
- S5 Cabriolet (3Q2009)
- A5 Cabriolet (4Q2009)
- A3 TDI clean diesel (4Q2009)
I firmly believe that sales are the result of a process, or a set of processes. Throughout the Audi enterprise we've paid attention and focused on the process rather than a sales goal. This is proof enough that we are continuing to execute our long term plans. In Europe, we are poised to exceed BMW and Mercedes Benz in sales by 2010. We have already started out ahead of Mercedes Benz in global sales for 2009, and YTD we are No.1 in Europe, ahead of both BMW and Mercedes-Benz.
To us, progress is not just a slogan or a word-of-the-month. Our mantra of progress, which has equipped us for these times, started at the beginning of Audi 100 years ago.
It seems in vogue to celebrate a centennial. Ford did so a few years ago, and GM did so last year. Now, 2009 is Audis year. A century ago, as August Horch was founding Audi, an era of invention was defining the automotive industry. Henry Ford's Model T made its debut in 1908. Over in Europe, at nearly the same time, the first diesel engines were being manufactured. And it was just about a hundred years ago that the first filling station was opened in the United States.
At Audi and across our industry, we now enter a new century, a "second century" – where innovators will focus on perfecting our industry and redefining the methods of the past. Our challenges are not "Will this engine work?", "How fast can it go?", or "How quickly can it be produced?"
No, the challenges of this second century are, "How does this affect the environment?", "How often will I have to fill my tank?", and causes us to also ask "What legacy are we leaving?" This is the century of "efficiency" – where less fuel means less foreign oil, less money at the pump, and less pollution.
"Efficiency" has long been a goal of Audi. Today, every consumer wants to make each dollar go further. The decision to buy a new or even pre-owned vehicle in these times is harder than it has been in many years. People want to know that the car or SUV they are buying is going to last and is not going to lead to an endless pit of gas money. Buyers enter a car lot with "fuel efficiency" on their minds and "miles-per-gallon" as the first statistic they look for.
As I look down the road into 2009, there are two aspects of car buying that stand out. In the immediate future, with a broken economy, consumers will remain extremely cautious and search for ways to stretch their dollars.
But the future of our industry rests with the ability to introduce new innovation and the outlook for 2009 rests heavily on the notion of "efficiency". This is where Audi TDI clean diesel comes in.
Diesel engines make more efficient use of the energy contained in the fuel they run on than petrol engines do. High efficiency heralds more than just financial benefits for drivers, especially on long journeys. In a clean diesel SUV with a 26-gallon tank, a motorist adopting a moderate driving style will surpass 600 miles between refueling stops.
Despite our statistics, American audiences are of course skeptical of diesel. But innovation is about pushing the envelope and challenging the industry standard. You need only look back at a game-changing shift to TDI clean diesel in our racing cars. With the introduction of the Audi R10 TDI four short years ago, the world watched in amazement as Audi vanquished all contenders and convincingly won the most challenging of races – the 24 hours of Le Mans, with a diesel powered car. And we did so repeatedly, with back to back to back victories for diesel in 2006, 2007 and 2008.
Last month, ESPN presented the broadcast premiere of Truth in 24. The documentary chronicles clean diesel in its most dramatic form – as the not-so-secret weapon of motor sports in the Audi R10 TDI. Skeptics doubted our shift to diesel racing technology, but no one's questioning the record of the R10 TDI.
The day after Truth in 24 appeared on ESPN, we unveiled our most advanced racing car to date, the R15, at the 12 Hours of Sebring race in Florida. It goes without saying that the engine in the new R15 is a TDI clean diesel engine. The R15 took first and third place in Florida.
Changing the perception of diesel on the racing scene was one early step in reintroducing diesel to the world. You don't win races by being parked in the pits. You need speed, you need reliability, and you need efficiency. Lower fuel consumption means fewer fuel stops. It's simple. Our racing cars are the best laboratory, if you like, for the technology we deploy in our road cars. And so, with our unrivaled track record and expertise in clean diesel technology, we are now able to redefine the diesel engine itself for American drivers as well.
Our TDI technology strikes the balance that many drivers are now looking for: efficient, clean, and powerful. Like the racing aficionados, American drivers have their doubts about diesel. The old diesel engines of the 1970's left memories of noise, sluggish performance, unreliability and black smoke - but we at Audi intend to replace those memories with our new diesel reality.
Take this statistic for example: If one-third of U.S. cars, pickups and SUVs were diesel-powered, the country could save up to 1.5 million barrels of oil per day, according to U.S. Environmental Protection Agency. We currently import roughly the same amount from Saudi Arabia every day.
This is not some far off technology. The timing is right, the technology is there. These are vehicles that hit showrooms this spring. European drivers and many of our peers in the luxury car market have already embraced clean diesel.
Let's reintroduce diesel to America, not only as a fuel efficient engine, but as an ever-improving technology that addresses some of the most difficult challenges we face today.
People demand that our industry head towards low emission vehicles and make strides to lessen America's dependency on foreign oil. And this is poised to become an even more prominent issue in 2009. Concerns about energy dependence are still whirring in the background of national security worries. One reason, even President Obama has gotten in on the act by pledging to increase fuel economy standards for automakers by 4% annually as part of his administration's energy policy. Added to that, diesel actually generates fewer greenhouse gases than a standard gasoline vehicle. 25% lower CO2 than a gasoline engine; lower NOX than a gasoline engine; fewer particulate emissions than a gasoline engine; Lower fuel consumption; exhilarating performance.
This is further proof that diesel is obviously more that just a pocket book issue. TDI vehicles are exactly the progress that this century of efficiency demands: reduction of foreign oil, reduced impact on the environment, and less money spend on refueling.
There will be many stories that define 2009. Audi will look back years from now at 2009 as the year that TDI clean diesel technology was introduced to American drivers.
I have given numerous talks and interviews on diesel. I watched the Volkswagen Jetta TDI win "Green Car of the Year" at the LA Auto Show earlier this year. American drivers should be on notice that TDI is now a consensus clean and efficient option for them. Hybrid is no longer their only choice.
Neither clean diesel, nor hybrids stand as the only answer. But great companies understand that consumers have unique needs and thus TDI is a solution to what many U.S. drivers are looking for.
If you have not already, call us and we'll arrange a test drive of the Q7 TDI. Crunch the numbers on diesel vs. unleaded. Listen to the difference in sound of a diesel engine driving past you – even at top speeds. Looks at the facts concerning emissions generated from clean diesel compared to gasoline.
I know that Audi's TDI clean diesel will stand the test. But don't take my word for it, see for yourself.
We are taking the first steps of our second century at Audi. I encourage you to take those first steps with us.
Thank you for your time and please ask any questions you may have.
