Automaker courts car buyers worldwide as city woos it

Village Volkswagen general manager Dale Smith says his problem with Audi these days is that he can't coax enough vehicles from the German automaker to sell.

"We've asked and asked and begged and begged for additional inventory for the past two years," he said. "They can only build so many."

Audi sales through July of this year in the United States were up 16 percent over last year to 65,055 vehicles, according to the Volkswagen AG subsidiary.

Like the VW brand, Audi officials have set ambitious growth targets for the rest of the decade both in the U.S. and worldwide, leading officials to say last month that the upscale carmaker needs North American production that it doesn't possess.

Audi Chief Executive Officer Rupert Stadler told Automotive News Europe recently the company wants to double new-car sales around the world to more than 2 million units by 2020. The report also quoted a source claiming the company is considering building an engine and transmission plant in North America that it could share with VW.

Jeremy Anwyl, chief executive of the auto website Edmunds.com, said Chattanooga may have a leg up when it comes to an Audi plant because of the local VW factory that began production of the midsize Passat in May.

But, he said, the battle for auto plants is extremely competitive.

"Nothing is automatic," Anwyl said. "They'll have to earn it like anywhere else."

Chattanooga economic development officials said they'd like to land an Audi plant next to VW's facility at Enterprise South industrial park.

VW has 1,340 acres, part of which it used to build its 1.2 million-square-foot factory. The German automaker also has an option for about 1,200 more acres. Since the Audi and VW are sister brands, there could be production synergies if the plants are adjacent.

"We've been working hard to build relationships with Audi and other members of the VW family of brands," said J.Ed. Marston, the Chattanooga Area Chamber of Commerce's vice president of marketing.

Global sales

Audi, based in Ingolstadt, Germany, has been a wholly owned subsidiary of Volks-wagen AG since 1966. The VW subsidiary is aiming to lap fellow German automaker BMW in worldwide sales. That would set Audi in the No. 1 spot among premium companies - like the goal of parent company VW.

In the first half of 2011, BMW was the top-selling premium brand globally with sales of 690,000. Audi sold 653,00, figures show.

Anwyl said Audi's two biggest competitors, BMW and Mercedes Benz, each have U.S. plants.

"They [Audi officials] might feel they need this to maintain their growth trajectory," he said.

Anwyl said Audi has done well from a product perspective in appealing to younger affluent buyers.

"The product seems to really resonate," he said. "Audi seems a little bit more hip."

In addition to the U.S. market, Audi sales are rising fastest in China, now the world's biggest auto market, and India, the world's second most populous nation.

Audi and VW were early entrants into China. Audi's sales in the first half of the year jumped 28 percent, delivering 140,699 cars in China. Meanwhile, Mercedes sold 95,030 units, an increase of 59 percent. BMW's first-half sales in China soared 61 percent to 121,614 units.

In India, Audi has plans to invest in the next four years to bolster production and expand its vehicle offerings. The luxury automaker aims to capture 25 per cent of the premium car market there by 2015.

Profits up

As important as growing sales is Audi's bottom line.

Worldwide, Audi reported first-half 2011 operating profit surged 90.9 percent from a year ago to $3.5 billion.

"It's reported earnings were through the roof," Smith said.

In the U.S., Smith said Audi's sales gains are due in large part to its fresh, new products.

He said the A7 is a unique-looking car for the premium segment.

"It's selling as quick as it hits the ground," Smith said.

Audi has redesigned its A6 sedan, and its Q5 sport utility vehicle is one of its fastest-turning units, he said.

While Audi is growing, Anwyl said its competitors aren't standing still.

He said BMW, which has a production plant in Greenville-Spartenburg, S.C., has upgraded its vehicle designs.

"It's new 5 series is doing really well," he said. "Styling is important when you're dealing with these price categories."

Mercedes plans to invest $2 billion into an expansion of its vehicle assembly plant in Vance, Ala., to accommodate production of its C-Class sedan.

Anwyl added that Toyota's Lexus brand, which used to be No. 1 until this year, has competitive SUVs in the segment.

Upcoming Events