Audi prepared for market challenges
BY TIM NICHOLSON | 17th Jul 2018
AUDI Australia managing director Paul Sansom says the company is well prepared for any further fluctuations in the premium market and expects a return to sales growth by year’s end after spending the past 12 months consolidating its line-up and correcting stock issues.
As GoAuto has reported, Australia’s luxury car market has contracted over the past 18 months after years of continuous growth for brands including Audi, BMW, Mercedes-Benz, Jaguar, Land Rover, Porsche and Infiniti.
Last year, Audi sales dropped by 9.3 per cent to 22,011 units compared to 2016, while the 10,642 units recorded at the halfway mark of this year place it 0.7 per cent behind the same period in 2017.
This slowdown is a change from the gains Audi has made in recent years. Its 2013 haul of 16,009 units was 10.1 per cent ahead of 2015, while it grew 20.1 per cent in both 2014 and 2015.
But the recent cooling off in the premium segment has brought sales declines virtually across the board, with the exception of Volvo and Alfa Romeo which were working off low bases.
When asked about his take on the slowing of sales in the premium segment, Mr Sansom said various economic conditions in Australia had impacted the market and it was difficult to predict when conditions would shift.
“If you listen and read most commentators, it’s directly linked to the house price, the market cooling off,” Mr Sansom said at an Audi media event last week. “There’s a very obvious trend to house prices in Sydney, in Melbourne, cooling over the last 12, 18 months. We saw the luxury car market drop by 5.7 per cent last year in the full year and by 2.3 per cent to date this year.
“I think that’s generally a feeling of real wages. Real wage inflation hasn’t really kept up with the general cost of living in Australia which is increasing quite significantly. House prices, where everyone took a lot of confidence, I think, as an Australian consumer from in the last, let’s say five, six, seven years where they really boomed, that has all cooled off.
“Therefore, the disposable income that people believe they have has maybe diminished somewhat.
“So I think there’s a general tightening of the household belt at the moment which will include luxury, sometimes discretionary purchases like a new vehicle. So that said – as always when you read economist evaluations – I’ve read some outlooks that maybe that will last into the next year or two.
“That things would stay cooled off and therefore we see the premium market as probably levelling off as well where it is.
“But I’ve also read some commentary that says, actually by the end of this year, we’re over the worst bit and things would start to pick up again.”
Mr Sansom said Audi Australia had worked hard over the past year to clear its excess stock and reshape its sales strategy with a focus in retaining a level of exclusivity.
“I think what our job is, is to make sure that we’re managing that supply and demand really well. When you look back over the last 12 months, we’ve really got our inventory under control. Our ethos is that we’ll try and always have one less car than there is demand for,” he said.
“That’s where a premium brand really should be. That’s where our customers, I think, would like us to be rather than a saturated market where you’re coming to a showroom, and there’s just dozens of the same-looking car around.”
Mr Sansom said the sales dip in the past year was partly attributed to a clean-up of the company’s stock – its strategy has included dropping under-performing model variants – and added that Audi’s focus was not on outright sales in Australia.
“It’s more of maybe a correction than a contraction in some respects. But for Audi, definitely I think … the market last year contracted, and our sales overall went down as you know. But at the same time, we put ourselves into a very strong, healthy position for growth,” he said.
“As I’ve said right from day one, it’s about the quality of sales that develop the premium brand in its market. It’s not necessarily always just about the quantity of sales.”
Mr Sansom said the market conditions in the premium segment would continue to be tough, but predicted that Audi would come out slightly ahead of last year’s sales tally.
“Despite the … prevailing conditions which are going to continue to be tough, we’ve got opportunities in the second half through our product particularly but also through some existing customers relations that are coming through,” he said.
“So we’re anticipating still some growth. We’re growing our market share already in the first six months which is great. We’re anticipating we’ll maintain that and we’d like to imagine that despite what we anticipate would be a fairly flat market, that we can exceed last year’s efforts.”
While Mr Sansom acknowledged the challenges of managing Audi’s extensive model range, he said a simplified line-up will ultimately strengthen the brand, ensuring better residual values for customers and putting the company in a stronger position than its rivals.
“We’re creating that premium feel for our customers and that’s really starting to translate into some of the results that we are seeing through our network, through our residual values and through our profitability,” he said.
“That’s a really important factor that we can control, despite what’s happening in the market.
“And it’s very difficult when you’ve got such a broad range as Audi, when you’ve got sub-$30,000 to half a million (dollars), you’ve got to try balance all of those models.
“That’s why I think having a simple, logical approach to the market, not too complex in terms of the product offering, you can manage that inventory a lot better and a lot tighter.
“That’s something we’ve definitely succeeded in over the last 12 months which is really putting our brand into a much stronger position than perhaps our competitors might be.”
