A4 remodel

Audi revamps as sales stumble

North American International Auto Show Audi A4 Sedan
It was new but didn't sell well. Source: DPA

Stung by declining sales of its iconic A4 sedan and the public relations black eye of another diesel scandal, Audi is racing to repair its marketing image by rolling out new models, including what is hoped to be the first electric German luxury SUV.

According to industry statistics, VW’s luxury car unit sold 200,000 fewer autos than BMW in 2017 and 400,000 fewer than Mercedes Benz. Chief among the problems: dealers complain that they are losing money on the A4 and sales in Germany are down by 3 percent and would have been worse had it not been for deep discounting.

Compounding management’s problems, the Federal Motor Transport Authority over the weekend ordered a recall of the latest Audi models with V6 diesel engines because they have been found to use illegal software that reduces emissions during testing but not on the road. The recall affected 127,000 cars across Europe.

“The interchangeability in this segment is so great that you can have an immediate fall off in sales when the design no longer appeals.”

Stefan Bratzel, director of the Center of Automotive Management

According to sources, Audi management, faced with these problems, has embarked on a restructuring plan to boost car sales by pouring new resources into design teams. Calling the program “Catching Up,” Audi CEO Rupert Stadler told employees that the A4 will get a quick design overhaul next year costing €150 million ($183 million) and the company is investing €500 million in sheet metal production equipment by 2019.

“With our plan, we know exactly where we need to go,” Mr. Stadler said, according to Audi sources. The company would not officially confirm the figures.

One of the verities of luxury car sales is that customers are increasingly migrating to off-road vehicles, even for use on suburban streets. Consequently, the company is pressing ahead with its electric SUV, the e-tron Sportback concept, which was shown at last year’s Shanghai motor show. The company hopes to begin sales of the battery-powered SUV early next year ahead of rival models from BMW and Mercedes.

Management is now counting on designer Marc Lichte, who was hired by parent Volkswagen, to repair the A4’s sagging image.

The new look for the A4, which will begin with a redesigned grille, is the first major luxury model overhaul since 2013, when Daimler was faced with a similar problem with the Mercedes E-Class. The company spent €1 billion on a redesign that stabilized E-class sales until 2016.

Experts believe the expensive plastic surgery planned for the skin of the A4 may be enough to bring customers back into the showroom.

“Technically the A4 is on a par with the competition,” said car expert Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach. ”On the other hand, the interchangeability in this segment is so great that you can have an immediate fall off in sales when the design no longer appeals.”

Other experts aren’t so sure the problems can be solved with essentially a cosmetic treatment. “Audi management intervenes too late when developments are going in the wrong direction,” said Stefan Randak, from the management consultancy Atreus. “We fear that problems like the A4 also threaten other models.”

Audi management is also remarkably unfazed by the scandal over its diesel cars, which was discovered in the US over two years ago but continues to haunt the firm. Two former Audi executives have been arrested by Munich prosecutors in connection with the installation of cheating software on Audi cars.

Mr. Stadler is so convinced that the scandal is behind the company that before this week’s recall he announced that the company’s diesel task force is being wound up by the end of March.

Markus Fasse is a Handelsblatt correspondent in Munich specializing in cars, Martin Murphy specializes in auto and defense for Handelsblatt, and Charles Wallace is an editor for Handelsblatt Global in New York. To contact the authors:  fasse@handelsblatt.com, murphy@handelsblatt.com and c.wallace@extern.handelsblatt.com.

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