Audi chief targets number one spot

On the eve of the major motor shows, Volkswagen’s board members like to flex their motor-industry muscles with their own show, featuring the lengthening list of brands in the group’s portfolio.

From Ducati bikes to commercial vehicles, outlandish Bugattis to affordable Skodas, the evening features a parade of new vehicles, as well as briefings from the head of each brand, all under the watchful eye of VW Group's patriarchal supervisory board chairman, Dr Ferdinand Piech, accompanied by his wife, who also sits on the board. It has the sense of an audience with the Roman emperor at the Colloseum, with each brand's chief executive making his pitch and hoping for a thumbs up.

For Audi, the big news this year has been the new generation TT, but the real story is its ongoing effort to end the decade as the number one premium brand. Much of the responsibility for achieving this goal falls upon Italian Luca de Meo.

Previously a high-flying executive at the Fiat Auto Group, he was at the right hand of chief executive Sergio Marchionne as they fought to turn around the fortunes of the struggling Turin-based car firm.

A bright future beckoned for this auto prince. Suddenly, at the end of 2009, he abdicated to Audi, becoming its head of sales and marketing. It was a surprise to many, and a savvy recruitment exercise by the Germans.

He admits it has been a steep learning curve, merging his southern European character with the highly structured German culture. But this is not some case study in cultural exchange: De Meo has a big job to do to deliver on the 2020 plan.

So far he has hit his targets ahead of schedule. However, recent analyst reports have cast doubt over whether Audi can hit its 2020 target. Both BMW and Mercedes have also stated their aims of being at the top by then.

Ambition
De Meo takes on the air of Jose Mourinho when defending Audi's ambitions. "The match is 90 minutes and we have comfortably overachieved our 1.5 million target set for 2015. We did it in 2013 with 1.75 million vehicles sold. When the plan was announced to double the volume in seven years, I don't think there were a lot of people who agreed it could be done. We are here to fight to get to the top by 2020."

His ambition to reach the top is not solely dependent on increasing sales in developing markets. Everyone, including staff in Ireland, have to work towards being number one.

“All of these guys have the target to stay ahead of our rivals in all markets. Sometimes they make it, sometimes not. The number one position globally comes from a number of number ones, and everyone has to contribute – in Ireland and not just the big emerging markets.”

To achieve his goal, De Meo faces several challenges, not least the need for car firms to maintain the allure of the car in a world increasingly fixated on the fast-paced digital arena. It's an issue that featured heavily in the address by Martin Winterkorn, chairman of the managing board of VW Group, on the eve of last month's Geneva motor show.

Winterkorn spoke at length on how the industry needs to respond to demands of “the digitised generation”, who want to be able to seamlessly marry their mobile technology with their cars.

“They should not have to forgo their much-loved apps and smartphones simply because they happen to be in the car,” he said.

His remarks coincided with industry analysis suggesting the next generation of buyers in large urban centres such as in the east and west coasts of the US, are more interested in getting the latest smartphone or tablet than owning a new car. The social status that once accompanied a new car has waned in these communities.

Previously a driving licence topped the list for teenagers, but that has now been replaced by the need to keep up with ever-changing tech. How can firms such as Audi regain the interest of these relatively affluent digital-focused twentysomethings?

Technology
"I think it's a challenge but you have to see also that the world market is growing. We all live in big cities in mature markets, but when you take a bit of a distance and you look at countries like China, India and Brazil, the young people really want a car. In China, we have an average age for Audi owners of 35, so I think it's a phenomenon very much linked to purchasing power and cost of ownership in highly urban areas.

“Four years ago we [did] research where 60-70 per cent of younger adults said they didn’t own a car but they had their driving licences, and 70 per cent said they planned to buy a car in the years to come, because when you get into a family situation then the car is still a ‘killer app’. But on the other hand we have to accept that people interact with the products in different ways these days, and we have to do the job.”

De Meo sees the future approach for Audi as aiming to be the best firm to integrate changing consumer technology.

“I think there is nobody better placed than us to integrate in the right way consumer technology in an automotive environment. If you look at what we do to test our products, nobody in any industry does it to the same extent. Our standards are brutal because the thing moves – maybe moves very fast. And because it’s sold to buyers who live at -50 degrees celsius or +40 degrees celsius. It should also be able to survive a crash; even if it does so against a wall at 50km/h, it needs to keep working.

“This integration is where the value will be created, because the people may say, ‘I’m going to buy an Audi because of the way these guys integrate the digital system that I need’.”

According to De Meo, Audi also needs to become more global, something he suggests he can help with given his global experience with Fiat.

"Audi needs to become more international and global. We are number one in Europe and also in China, because some visionary people 25 years ago decided to engage in that market. If you look at Audi in the US, for example, or other markets, this is where the distance to our competitors who got into these markets earlier is higher. So we need to work to globalise Audi."

Audi may be an integral part of the VW Group, but there remains an air of aloofness about the brand, a distance from the sister brands of Skoda, Seat or even VW. It’s something De Meo recognises and, in some ways, supports.

“The people are very proud of their achievements and they have a very strong culture, and this is something we have to nurture. Not the separation, but we are Audi and we need to be true to Audi, and that means we look at things from a certain perspective.

“Each brand is responsible for its own success. Go to Bentley and it’s English; go to Ducati it’s Italian. I’m on the board there and I love those guys, but I respect their way, and that’s the secret of the VW Group.”

Spotlight
Whether De Meo's Italian charm can put Audi ahead of Mercedes and BMW by 2020 remains to be seen. A greatly expanded model line-up has helped so far, but without a multitude of new niches to exploit, and with growth rates in developing markets such as China tapering off, the next push towards two million annual sales will be more difficult. At the same time the tech challenge will play its part, as will increasingly stringent environmental standards.

Achieving the top spot would certainly put De Meo in the spotlight, perhaps even in a central role in the group’s 2020 preshow brand parade in front of VW’s emperor of that time.