Audis in Texas

Houston, Texas, June 2007

Audi, recognized as a premium brand in Europe, is virtually unknown in the US.

Audis are widely viewed here as upgraded Volkswagens, despite marketing campaigns intended to regain market share and change American buyer perceptions.

Audi builds some very good cars, but a bigger ad budget is not the answer: in the luxury segment dealerships and service trump ads and glitz.

Is Auburn Hills, Michigan-based Audi of America, a permanent second-tier player, too far behind Lexus, BMW, and Mercedes to close the gap?

And what about Acura, Infiniti, and Volvo?

In a Luxury Institute survey of high rollers, Audi came in ninth in perceived prestige.

Market Position

World sales hit 900,000 vehicles in 2006, up 7.3% from 2005. The brand fares well in booming China, using local labor. But less than 60K were US sales.

Is this, just .5% market share, enough to build a luxury level dealer network? Although early 2007 sales were up substantially, Audi continues to struggle in the US market.

Corporate Culture

acquired by Volkswagen in 1964, a wholly owned subsidiary of the Volkswagen Group, Audi now conflicts with the parent brand's floundering upscale move.

With development cash scarce, the critical dealership build out is hampered by the many combined AudiVW dealerships, which do not share the premium image projected by the luxury leaders.

With the chaos at VW, (Porsche takeover, union and political involvement, product positioning mistakes...), a revolving door management scenario has evolved.

This is not the first car company to miss the "secret" to success in almost every business: focus on the customer, not your own ego.

Quality Record

Consumer reports has "recommended" ratings on A3, A4, A6, and S4 Audis.

Despite many positive press reviews, Audi's reputation for quality lags that of luxury competitors.

Wins in European racing, like the recent 24 hours of LeMans, do not impress Texan Audi buyers facing quality issues on these luxury-priced cars.

In the J.D. Power and Associates 2006 Customer Retention Study, Audis ranked 26 out of 37 makes. Only 35.6% of those surveyed returned to purchase another vehicle.

In my opinion, repeat buyers are the strongest indicator of overall quality.

Audis are notorious for electrical failures, with consequent fires.

There were oil sludge issues, poorly handled by the company, which required customers to have retained all oil-change records for warranty claims. See links at bottom of page.

During the 1980s over 1,000 Audi 5000s were involved in accidents which appeared to be caused by Audis surging forward suddenly without gas pedal pressure.

Sixty Minutes aired a report which highlighted consumer experiences with these cars, inflicting serious brand image damage.

Subsequent investigations failed to find fault with the 5000, other than euro-styled close pedal placement.

The majority of the company’s 50,000 unionized employees work at two plants in Ingolstadt and Neckarsulm, Germany. This is the world's most expensive place to build cars.

Dealers have been unable to keep up with warranty claims, with service results inconsistent with the luxury tag.

Audi ranked well below average in the most recent JD Power dependability study, which surveys 3-year old models for repair issues. With a reported 295 issues, the brand was bested by a large number of non-luxury makes.

Power's 2007 Initial Quality Study (IQS) awarded only 24 stars out of 40, pretty average.

The IQS study incorporates buyer complaints about the unfriendly German media interfaces, and customer satisfaction among new-vehicle owners with the dealer service department, during the first three years of ownership.

Dealership Network

Here is the reason Audi is not viable in the US market.

These are good products, as measured by design, technology, and engineering.

The problem is quality and service.

The franchised dealership distribution model has become an impediment to the industry.

Many Audi dealerships, below-average in profitability, have very low morale, and do not deliver service competitive with luxury segment leaders.

A low density network of around 260 dealers average maybe 30 sales a month. Dealers cannot run a quality business at that volume.

This forces the profit focus to shift to the service bays and used vehicle sales.

Low volume and low margins is not the formula to attract top exclusive dealership operators. Dealerships combined with Volkswagen will not provide Lexus-like ownership experience.

To effectively support a brand nationwide, 2,000 outlets is a nice target.

Many independent shops have prospered, offering non-factory Audi service, with some only a few miles from a franchised dealer.

Conclusions

In my opinion, this is another German company out of touch with the US market. Racing and marketing campaigns, advertising blitzes, and the glitzy New York Audi Forum showroom, do not address the brand's fundamental weaknesses: quality and service below the price band of the product.

VW management must put daylight between the Audis and the VW brand in the US, and accept the failure of the VW upmarket plan with a little humility. For management back in the old country, who are reported to have dismissed junior executives for even informal criticism of the failed upmarket push, this will be difficult.

Eight dealerships, concentrated in the major cities, sell Audis in Texas.

1. Advantage Audi
11811 Katy Freeway
Houston TX 77079

2. Momentum Audi
2315 Richmond Ave
Houston, Tx 77098

3. Millennium Audi,
17815 North Freeway,
Houston, TX 77090,

4. Roger Beasley Audi
12971 Pond Springs Rd
Austin TX 78729

5. Cavender Audi
5772 NW Loop 410
San Antonio TX 78238

6. Baillargeon Audi
1701 Airport Fwy
Euless, TX 76040 (DFW area)

7. Boardwalk Audi
5930 W Plano Pkwy
Plano, TX 75093

8. University Park Audi
5033 Lemmon Ave
Dallas, TX 75209

See also consumeraffairs.com audi complaints (new window).