Editor’s welcome: Audi and the race to own premium, CAR+ June 2016

Published: 30 May 2016

The power of premium brands! Shortly after moving from BMW to become Opel-Vauxhall boss, Carl-Peter Forster told me of his frustration that, despite the Vectra having largely the same componentry value as a 3-series, GM couldn’t charge anywhere near the same price. 

Back then, premium still meant exclusivity. BMW, Mercedes-Benz and Audi had built their brands through decades of strict management, investing heavily in perceived quality, leading-edge technology, consistent design and often superior dynamics.

Then they went into new model overdrive: pushing into SUVs, superminis, hatchbacks, supercars. Premium became mainstream: the 3-series outsells the Insignia, of course, while the Mondeo’s modest sales ironically offer exclusivity.In 2006, Audi was the UK’s tenth biggest automotive brand, selling 85,494 cars.

A decade later, the brand lies fifth, having almost doubled its volume, and  with its market share growing almost three percentage points. BMW and Mercedes have also zoomed up the sales charts: the trio sold almost 480,000 cars here last year, accounting for more than 18% of the market.

The squeeze on the middle is only going to continue: the Germans each want 200,000 UK registrations by 2020.What’s the biggest driver of Audi’s UK land grab, I asked the company’s genial PR director, Jon Zammett, over dinner the other week? Simple, rational economics, he reckons: strong residual values underwrite competitive lease rates and running costs; a focus on low CO2 engines is essential here too.

Layer on the brutal sales war going on between the Germans – also stoked by challenger premium brands such as Jaguar, Lexus and Volvo – and strong marketing incentives make for a monthly lease rate that is hard to resist, when coupled with the strong brand draw.

The UK is Audi’s fourth biggest market overall, but the TT is a peculiarity: Brits buy more TTs than any other nationality, accounting for half of all European sales. I’d like to think that’s down to our long-standing love affair with wieldy sports cars, as well as being suckers for a style icon. 

The SUV push will continue with this year’s all-new Q2 and Q5, and a flagship Q8 and the Q6 e-tron in coming years. Audi is investing €3 billion in r&d this year, with electrification and digitisation receiving a big chunk of cash. The goal is to keep Audi ahead of the pack, establishing the brand as a leader in connected cars, autonomy and e-power, and ultimately reaping the consumer benefit. 

Audi’s goal is to be the world’s leading premium brand by 2020 – an aspiration also shared by BMW and Mercedes. It’s unclear who’ll win that battle. But it’s clear who the losers are: the ever-shrinking mainstream brands.

Read more from the June 2016 issue of CAR magazine

By Phil McNamara

Editor-in-chief of CAR magazine

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