Audi Seeks to Close the Luxury Brand Gap

Audi Mexico

In Mexico for the ground breaking of Audi’s first manufacturing plant in North America. Pictured from from left to the right: Frank Dreves, Audi Board Member for Production, Ildefonso Guajarda Villarreal, Mexican Economics Minister, Rupert Stadler, Chairman of the Board of Management of AUDI AG, Rafael Moreno Valle, Governor of the State of Puebla, and Filogonio Vargas Torres, Mayor of San José Chiapa.

Audi, the German luxury marque, is on a roll. Three times since Dec. 2012 its sales have topped 13,000 units, putting it on a path that it expects will one day enable it to overtake market leading BMW.

Luxury Market Competitors

Audi will also have to overtake Mercedes-Benz, Lexus and Acura a long the way and hold off surging Cadillac, but it does have an ace in its sleeve that will be pulled out in a few years: a Mexican factory with a build capacity of 150,000 units. This past weekend executives from Audi broke ground for its San Jose Chaipa facility, the first Audi manufacturing plant in North America. Likely, most of the production capacity for the Mexican plant will serve the US market.

AudiAudi is on pace to sell 150,000 vehicles this year after topping the 100,000 unit mark in 2010. Even if Audi doesn’t grow for a few years, which is highly unlikely, it will sell at least 300,000 models in 2016 with the addition of the Mexican plant. Based on 2012 figures, that number would put it in first place ahead of the pack.

Monetary Fluctuations

Building Audis in North America will put the brand on a level playing field with its German rivals. Both BMW and Mercedes-Benz have long built vehicles in the United States while Audi has had to rely exclusively on imports. The vagaries of foreign exchange markets also means that Audi has to weather monetary fluctuations that often work against European manufacturers. With a sizable part of its capacity coming from lower wage Mexico, the money pressure will be eased considerably.

The Audi Q5 is the model slated for the Mexican plant with additional crossover SUVs possibly in the works reports Bloomberg. By 2020, Audi expects to sell more than 2 million units worldwide, with the brand providing a significant amount of the funding its parent Volkswagen Group is relying upon to further its growth. Volkswagen manages 12 brands with the eponymous Volkswagen brand outselling the other brands combined. Asia and North America are providing the best growth opportunities for this automaker.

Audi: King of the World

In 2008, Volkswagen announced that it was aiming to take over the top car manufacturing position in the world, held by Toyota and General Motors most recently. Group sales continue to rise rapidly and the company may move on top by 2014 if not 2013. The A4 and current Q5 are its strongest sellers with significant growth coming from other models including A5, A6, A8 and Q7 models.

Photo courtesy of Audi of America, Inc.

Comments

  1. says

    Moreover, the plant being built will have an initial capacity of 150,000 units. Audi planned the plant for expansion, expecting one day to build as many as 300,000 vehicles per year in Mexico.

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