Re: Audi Price Cuts

[John Greenstreet <jgreenst@motown.ge.com>]

> From quattro-owner@swiss.ans.net Thu Oct 13 12:53:31 1994
> Date: Thu, 13 Oct 1994 09:23:37 -0700 (PDT)
> From: "David R. Derting" <davidder@teleport.com>
> 
> Audi's problem, in my opinion, is that the market still has lingering 
> doubts about product quality (compared to world standards, this is 
> probably valid) 

Americans don't know a lot about quality, and actually believed much
of the propaganda spewed forth in the Harvard Business Review by Prahalad
and Hamel about fantastic Japanese productivity and quality.  Sure, short-
term reliability of Japanese cars was superior to the competition for a
short while, but this advantage has long since evaporated, as did their
300% productivity advantage, which dissipated as the yen strengthened by
300%, leaving us to wonder if their productivity miracle was merely the
result of a "speculative bubble" which depressed the value of the yen
relative to other currencies during the mid-80s.

In statistics-obsessed Germany, much data are accumulated on all cars
in a scientific fashion, such as breakdown rates and faults found at
inspection agencies.  These data do not show that Japanese cars are
more reliable on average than German cars, although a few mini-cars,
e.g. Toyota Starlet do very well.  However, since Piech's reign, Audi
quality is regarded to be equal or better than Mercedes, and far
superior to BMW.  In terms of quality (not reliability), such as
interior/exterior materials, fit and finish, Japanese cars are
perceived as inferior to German, and even some French cars.  In terms
of 35-mph offset crash test performance, Japanese cars are years behind
the European competition, doing worse than even some Fiats!  
Because of these factors, the Japanese have been losing market share at
the rate of 2% per year since 1990.

> and is not sure what an Audi really is . . .  BMW = 
> "ultimate driver's machine" (also status symbol for the nouveau riche, 
> ditto for Lexus), Mercedes & Jaguar = status symbol for old money, etc.  
> >From this point of view  Audi is a big black hole in a very crowded 
> product field.  I don't think that the Germans understand this near as 
> well as the Japanese car makers.
> 

I believe the Germans understand the US market well, but German and
Japanese companies have different goals when it comes to the US
market.  Honda, for example is a minor player in the Japanese market,
so it makes sense for it to concentrate on the US market.  This is even
more true with Lexus and Infiniti, where all but a few sales are made
in the US.  These are not world cars; they are built primarily for the
US market.  Infinitis are not even sold in Germany, and as of July
1994, exactly 72 Lexi had been sold there since the LS400's 1990
introduction.

Audi is quite a different story, owning around 4% of the German market,
a large slice for a company with only two basic models, and the 80 has
been the third-best selling car there for more than a decade.  Audi
sells far more cars worldwide than Acura, Lexus, and Infiniti
combined.

Audi sells one product to all markets, and since the majority of sales
are in Europe, that's the market for which the car is designed.  This
has always been the German philosophy: we make the product as good as
we know how, and if you like it, buy it.  I am not aware of any case
where they have tried to dominate a market as the Japanese do.

This is great for purists who desire a pure German driving experience,
but this necessarily limits sales to this highly educated, erudite
group of literate, generally-likeable people.

Of course, with good marketing one can sell a lot of just about
anything, and David is right in saying that Audi is a black hole as far
as image is concerned.  I wrote to them suggesting that they should
leverage their superior performance in offset crash tests, but there
may be problems with this approach in our litigation-happy country.  I
think my brother--a former Acura, now Audi owner--summed it up best
when he said that he liked Audis because they have a zero GCI--Gold
Chain Index.

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John Greenstreet, Senior Engineer           (jgreenst@motown.ge.com)
Martin Marietta Government Electronic Systems    Moorestown NJ 08057
WPI Class of '75, Temple Class of '94

My new car history:
  1975    1978    1982       1986        1989      1992      1995
   VW ->  Audi -> Audi  -> Mercedes -> Mercedes -> Audi -> Mercedes
Scirocco Fox GTI  4000S    190E 2.3    190E 2.6    100CS     S320

POSSLQ's* new car history:
         1978       1981       1985      1988        1990     1993
       Triumph ->  Toyota ->  Toyota  ->  VW    ->   Audi  -> Audi
       Spitfire    Tercel     Corolla   Jetta GL      80      90S

*POSSLQ = Person of Opposite Sex Sharing Living Quarters
Note: All Audis and Mercedes above were sold to friends or family.
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