New $50m Audi Lighthouse set to shine

THE world’s largest Audi dealership will be officially opened in Sydney with a gala event at the new 16,000 square-metre facility on Thursday night.

Audi Australia says its flagship ‘Lighthouse’ development, which is the first in the world to combine a national headquarters with a retail outlet, was completed on time and within its $50 million budget.

Company chief Joerg Hofmann said the business case for the eight-level Audi ‘terminal’ was based in large part by the site’s high-visibility position on South Dowling Street at Victoria Park, between Sydney’s CBD and airport.

“With 100 metres of street frontage on this busy arterial road, no one will miss this extraordinary brand statement. It will raise awareness of Audi to a completely new level in Australia,” he said.

“The investment in Australia by our parent company, Audi AG, is representative of our outstanding achievements and is a clear message of support for our successful year-on-year record growth.

“Significantly, it also demonstrates the company’s long-term commitment to this country and our confidence that our brand will continue to grow in this economic climate,” he said.

“When I was in Germany (to obtain approval for the project) I said the billboard value was €1.5 million ($A2.58m) a year.

“We have more than 40 million cars pass the dealership each year. They see the brand, the architecture and perhaps they think to buy an Audi. You have to ask, how much does it cost to reach 40 million people?” said Mr Hofmann.

Left:Audi's Australian headquarters.

Global head of sales and marketing, Audi AG board member Peter Schwarzenbauer, will officially open the newest Audi Lighthouse, which surpasses the recently opened Audi Lighthouse in Shanghai, China, in terms of size, with Mr Hofmann this week.

He said the unprecedented $50 million investment demonstrated the German luxury car-maker’s commitment to the Australian market.

“The Audi Lighthouse development in Sydney is part of a major investment campaign by Audi AG. We will expand our product range to 40 models by 2015 and will sell more than 1.5 million cars,” he said.

“We’ve got the right products in the pipeline for our ambitious growth plans and now we are setting the course in sales and marketing. The Audi sales organisation will invest €6 billion in our effort to increase sales by 50 per cent globally in the next six years. Part of this is investment in new architecture for the brand.

“For us, it is about bringing our brand to our customers with trend-setting dealerships that focus on people. This new Audi Lighthouse in Sydney is not only the largest yet to be built, it is also a great statement for the brand in Australia.” Mr Hofmann said the building was a key component of Audi Australia’s role in the Volkswagen premium brand’s global ambitions, with the retail facility expected to account for 10 per cent of Australian sales, or about 1000 vehicles in 2010 – double the number sold by the previous outlet in nearby Rosebery.

He said his company was well on track to achieve its target of 15,000 annual sales earlier than forecast in 2015 – up from 9410 sales in 2008, when sale increased by 30.2 per cent. Audi sales are up 12.1 per cent to July this year.

“If we crack 10,000 (sales) this year, which I believe we will, then I think it be very unlikely we will get another year of 30 per cent growth (in 2010), because the base gets higher and higher. But I certainly tell you we will have another record year next year. I'm very confident,” he said.

Mr Hofmann disputed claims by some rival luxury brands that Audi Australia, which has posted a sales increase every year since it came under factory ownership in 2004 but has not made public its financial results in recent years, had effectively “bought” its market share by discounting.

“These people (rival brand), they are bit desperate sometimes - they can't understand why we are so successful,” he said. “Fair enough, we can smile about it, because we overtake them all very soon.

“They start throwing dirt and say we discount and whatever kind of crap comes to their mind. I mean, I'm bored about it. We just move on and in two or three years we are ahead of all of them,” said Mr Hofmann, adding that eight of Audi’s 34 dealers nationwide already outsell their German-brand counterparts in their area.

Hofmann said: “We will have the most profitable year this year. We will achieve our financial budget to Germany by more than $1 million. That is, Audi Australia will make $1 million more profit than was in the plan.

“You can only build new dealerships, invest in brands and do sponsorships and whatever if you're profitable. You can't make profit if you discount. All our dealers make money. Our dealer average return on sales is above two per cent, even in the (financial) crisis. Our benchmark dealers are (making) between three and four per cent (profit on turnover).

"The Volkswagen Group has cash liquidity of €12 billion ($A20.6b), almost €9 billion ($A15.4b) of which came from Audi," said Mr Hofmann. "Stuttgart (Mercedes-Benz) and Munich (BMW) lost money in the first quarter of this year. By achieving our profit and sales targets we will overtake them.” Mr Hofmann said the latest dealer satisfaction survey ranked Audi among Australia’s most sought-after new-car franchises.

“In 2004 the Audi franchise was certainly not the most attractive one, and we were 20th, 24th, 18th, something like this. And now we are number one or number two.

“Our dealers make money. A dealer has to make profit. If he makes profit he is able and willing to invest and then he is happy. And this is reflected in dealer satisfaction,” he said, before refuting claims that Audi models were therefore over-priced.

“You can't say that. They pay a price for what the product is. We are certainly not over-priced,” he said.

“What you should not forget, the development of our cars is a very expensive exercise. The quality of the materials, etcetera, is more expensive than a Korean car. And you have to pay the price for that. If you don't care for German engineering then you can buy a cheaper car.” Mr Hofmann pointed out that while product and marketing were the two pillars that attracted customers, the brand’s recent new and additional model rollout, which has seen almost every model updated or replaced by an all-new model in the past four years, was not solely responsible for Audi’s resurgence.

“Audi has always had great products, even five or six years ago,” he said. “The problem was the brand was not perceived the way it should be. The marketing was wrong, the dealership was wrong, the organising of the people was wrong. These are the factors we fixed when we took over the business here in Australia.” Mr Hofmann said that combining both retail and administration aspects of the business in one facility would deliver benefits for both parties.

“Retail and head office get to see what's going on in the other side of the business,” he said. “It gives our sales and marketing people a chance to get closer to customers, and the retail people to understand the bigger Audi picture. It's the best way to get market intelligence – we can just go downstairs to see what's going on.” Unlike BMW and Mercedes-Benz, which both either have or plan to have factory-owned dealerships in Sydney, Melbourne and Brisbane, the Lighthouse is Audi’s first wholly owned retail outlet. But Mr Hofmann did not rule out the possibility of building other Audi-owned outlets in Australia – once the Lighthouse was established.

“I will tell you, at the moment as I'm sitting here, there is no plan (to build another factory-owned dealership), but nobody knows in business what happens in five years. I may have a dream about something, but it’s really, believe me, far, far away.

“Let’s get Sydney started first. I will never say never, but I will believe there is potential outside Sydney. The advantage is at least you have control of things 100 per cent … but also how the brand gets displayed and demonstrated.

“Also pricing, making sure the dealers don't discount and that sort of stuff, because in your own facility you tell them 100 per cent what needs to be done.” Audi is undergoing the most intensive dealer network restructure in its Australian history, with seven outlets either renovating or relocating their showrooms in line with the brand’s new corporate identity over the next 12 months.

Audi said the Lighthouse was designed by its “master architect” Allmann Sattler Wappner, adapted for Australia by Johnson Pilton Walker. It houses a “flagship” retail showroom with space for more than 25 new and 70 used vehicles and 20 service bays, trading as Audi Centre Sydney.

Open since August 1 – precisely a year after construction started at the site, which was bought in October 2005 – the lighthouse offers customer facilities including a children’s play area, “lifestyle” shop, business centre, the Audi Café Bavaria and an aftersales centre.

“A key part of Audi’s strategic growth plan in Australia requires investment by the dealer network in facility upgrades, preparing the brand to reach 15,000 unit sales in the year 2015 at the latest, and to deliver best-in-class customer satisfaction,” said Mr Hofmann.

“The total investment in new and upgraded facilities committed by our dealer partners in Australia will equal $150 million by 2010. We also saw the need for our own investment in the brand – the Lighthouse – to ensure the infrastructure was right for our planned long term growth,” he said.