In November 2015, less than two months after Volkswagen’s emissions scandal broke, Dietmar Voggenreiter took over as board member for sales and marketing at VW subsidiary Audi. That same month, Volkswagen admitted that the same test-cheating software had been installed on other cars, including some Audi diesel models.
In his first interview since assuming his new job, the former head of Audi China took stock of the past year and provided insight on cars in the digital age.
Handelsblatt: You have been responsible for Audi’s sales and marketing since November. What did your predecessor leave behind for you?
Dietmar Voggenreiter: I took over a top team in the second half and was allowed to drive the game home with them. We set a goal of selling more than 1.8 million cars in 2015 — and we did.
“We are still in talks about that with the two environmental agencies in the United States. The goal is to find a solution that, on one hand, satisfies environmental laws and, on the other, is also customer-friendly.”
Despite the well-known emissions scandal that halted sales of diesel-powered models in the United States?
Right. Our customers remained true to us in these turbulent times. Our dealers on the ground also did a super job. Overall, we felt no impact on sales in our largest market, Europe. Naturally, an uncertainty among customers was felt in markets that heavily align their taxation to CO2 emissions. But this issue was finally cleared up for us at the beginning of December. No Audi model is affected by this issue.
But U.S. revelations of rigging exhaust levels of diesel vehicles must have had an impact.
A ban on sales naturally impacts the affected models. Diesel customers in the United States very specifically buy cars with such a drive — you don’t get them so easily reprogrammed to gasoline.
How large was Audi’s most recent share of the diesel market in the United States?
Significantly lower than in Europe. It was about 8 percent across all models. It was higher with the Audi Q7, our largest SUV, than with the A3. Naturally, we now miss these diesel models as long as sales are suspended. Despite that, even with the ban on sales, we have been breaking records each month, and in 2015 grew twice as fast as the car market there. Our U.S. business is a real success story for us. We wanted to break the 200,000 car-mark, which was our interim goal for 2015, and we achieved it significantly earlier than planned.
This volume wasn’t actually planned until 2020, though?
Right. That shows that our U.S. business is very robust. Our dealers and investors are also very satisfied. Now it is a matter of quickly and cleanly dealing with this diesel issue.
When will you know what changes have to be made to the 3.0-liter diesel engines to meet U.S. environmental guidelines?
We are still in talks about that with the two environmental agencies in the United States. The goal is to find a solution that, on one hand, satisfies environmental laws and, on the other, is customer friendly.
There were concerns this past summer about the Chinese car market. How did you do there last year?
We reached a very high level of sales in China again in 2015. The diesel and CO2 issue plays no role there, partly because car registration is regulated differently there than in Europe.
All the same, Audi sales in China dropped in 2015, at times by double-digits.
As market leader in the premium segment, we consciously made the decision to run 2015 as a year of consolidation. As the slump in growth became apparent, we stood by our strategy all the more, which is to focus on profitability and customer satisfaction.
Audi didn’t enter into the discount battle?
I have clearly stated in the past that we don’t have to gain volume at any price. In 2014, we worked hard to build a big lead, and were clearly further ahead of our competitors than ever before. That position of strength allows us to deal with market fluctuations flexibly and with business sense. We have no interest in a price competition at the expense of our dealers.
Have you sacrificed market share by doing that? After all, November brought a drop in sales of 6 percent.
That also depends on the previous year’s yardstick. At the close of 2014, we introduced the A3 sedan in China and recorded an extremely strong fourth quarter. The minus for the overall year, which was certainly a special one with its market volatility, turned out to be significantly lower, at about 1 percent.
Will 2016 again be a “special year,” requiring you to approach with the brakes on?
No, the Chinese market stabilized at the end of 2015 and overcame its weak phase. We are at sales of around 50,000 cars a month, putting us again in range of our goals.
Are the golden times in China over for premium German carmakers?
The platinum times, with high double-digit rates of growth, are over. With an overall market of 19 million cars, growth increases of 30 percent or 40 percent are no longer realistic. But the prospects are still golden, even with single-digit market growth. China is a very solid growth market, with plenty of potential for the Audi brand.
Even though environmental pollution caused by traffic in China is rising and driving bans are being imposed in major cities due to smog?
I lived in Beijing myself for seven years and welcome that the Chinese government is more strongly addressing environmental issues. It will be important to press ahead with this across all branches of industry. In the car industry, (pollution) is forcing the demand for advanced energy-efficient technologies and alternative drives.
Will the diesel affair accelerate the energy transition to electric drive in the automotive industry?
Market conditions around the world vary greatly. Today, we have in Europe a diesel share of up to 80 percent.
That might drop due to the recent debate on emissions.
I don’t believe so. The diesel’s strengths are obvious — low fuel consumption, favorable operating costs and enormous engine power. In the United States, the diesel is traditionally less popular. But diesel drivers I have spoken to there are confirmed believers in the technology and don’t want to do without it. That means the era of the diesel engine hasn’t past, given that it is still being improved, just like the electric drive.
Let’s take a look at the market development again. Audi clearly lost ground in Germany in 2015 as a result of competition with Mercedes and BMW. Have you intensified sales promotions because of that?
Audi is the market leader in Germany among premium producers in the passenger car segment. So the issue doesn’t arise.
The boss of a leasing company told me Audi is massively promoting sales of some models. Because of that, he is currently able to offer the A6 executive sedan, for example, for a monthly lease of €299 or $326.
I am not familiar with that offer or the calculation behind it. For us, it is definite that we will stick with our strategy of long-term price stability. Our dealers in Germany, as independent businessmen, also must make money running their businesses. Their profitability has enjoyed a very gratifying development in 2015.
Volkswagen has launched a cost-cutting program that is supposed to free up money for costly recalls and penalties. Where are you applying the red pencil?
Audi has had a fitness program for a number of years. We regularly scrutinize our projects. But the fact is, we completely live up to all our contracts with sponsoring partners.
Audi sponsors soccer clubs and is active in ski and sailing. There is hardly any major sporting event without the four rings.
We are a sporty brand and our customers are also interested in sports. That is why that world is the place for us to be.
But as the new board member responsible for marketing, you could set a new tone.
We have in our strategy a clear focus on certain types of sports, primarily soccer and winter sports. We will maintain that orientation.
Do you then perhaps already have a strategy for online marketing? BMW plans also in the future to sell new cars online in Great Britain.
Digitalization is the megatrend for coming years, certainly in marketing and sales as well. Audi will expand its product portfolio to 60 models by the year 2020. There is no car dealer in Germany today that can show the complete Audi range to our customers. For that reason, Audi is also a pioneer when it comes to developing digital technologies for our dealers. We already have private customer lounges — suites with huge TV screens where customers can configure their Audi together with a consultant. In the next step, that will be possible with virtual reality glasses. Then our whole range of products will fit into a briefcase.
The complete car sale can be processed on the Internet with Tesla and BMW. Do they have more courage?
There are a number of ways today to connect between online and offline. We consciously focus on the dealer and are setting them up digitally. For us, that’s the basis: The dealer is the customer’s central contact with the brand. A personal conversation with a pro is elementary in such an important investment like a premium car.
So you rule out direct marketing and sales on the Internet in the future?
We are adhering to our premise and integrating Audi dealers into our activities. That applies to digital solutions, as well as to our mobility services.
What mobility services do you mean?
For example, our “Audi At Home” service. It is a car-sharing concept we are testing in the United States. For a fee, residents of luxury condominium projects (being built in San Francisco and Miami) can choose from a fleet of Audi models when they need a car.
That sounds like a very elite solution. You aren’t thinking of a free-floating system along the lines of German car-sharing firms Car2Go or Drive Now?
We don’t see that as the right approach for Audi. That isn’t an attractive concept for many of our premium customers. When I come out of a plane, I’m happy to be able to get into my own car and find my own private little world there. Perhaps I want to share this world with people I know, with friends and neighbors, but not with every Tom, Dick and Harry. So we concentrate on projects that follow this thought. For many people, the car is still something like their own living room — you don’t let everybody in.
The sharing economy is already considered a major trend.
Absolutely, but in very different manifestations, according to the market segment. Premium customers share for completely different reasons than elsewhere. Not out of cost reasons or because they have to get from A to B, but rather for the fun of a shared experience of suitable quality and highest comfort. We develop our services for these demands. At the same time, I’m convinced that megatrends also don’t apply to all customers. Very many people also continue to connect maximum flexibility with their own car. Just as there will still be hotels in the future, despite the success of Airbnb.
When will we be also able to experience and use Audi’s new mobility concepts in Germany?
We’re going about the rollout gradually. But we don’t believe that our concepts apply equally to all countries and cities. The mobility habits and local conditions in Europe are too varied for that. In Stockholm, for instance, “Audi Unite” works very well for innovative fans of our brand. There, communities of friends or colleagues share an R8, for example, to enjoy the car. At the moment, selected Audi dealers are offering shared-fleet services to German customers. We will take the next step here in 2016.
Will the new head of marketing and sales come up with a new brand claim for Audi?
Most certainly not. Vorsprung durch Technik (Progress through technology) will stay. It is one of the strongest claims in the world. That’s something I most certainly don’t have to think about.
This article was first published in the business magazine Wirtschaftswoche. To contact the author: firstname.lastname@example.org