Government Association Could Hurt Audi's Chinese Market Strategy Says Bloomberg BusinessWeek
byon 11-01-2011 at 10:01 AM (2935 Views)
There's no doubt about it, China is driving the automotive industry. Success there has saved brands like Buick from the chopping block while unparalleled growth of the marketplace has rocketed China to largest market for Audi... besting even the home field of Germany. So, when Bloomberg Businessweek prints a report suggesting Audi could be in poor strategic position here, Audi and those watching the brand (like us) sit up and take notice.
According to the Bloomberg BusinessWeek report, it all comes down to government association. Where once being the official car of the government may have added to a brand's esteem, China's move toward global awareness has left such positioning more a detriment says Bloomberg. If the story is accurate in its assessment, then Audi is finding itself in the very rare position as being perceived as stodgy... hard to believe given this is the same brand that builds the R8.
For some background, Audi was one of the first (if not THE first) luxury car manufacturer to enter China. It began building the A6L with local manufacturing partner FAW at its Changchun plant back in 1999. At the time, the only Chinese buying such luxurious cars were the government and buy they did. Audi had a lion's share of the luxury market.
So here we sit today, as BusinessWeek states market share down 25%. The story also mentions that government agencies are now restricted to cars with 1.8-liter engine displacement, leaving the A6 out in the cold and suggesting a big chunk of Audi's business will very quickly dry up.
Considering just these points, the situation sounds pretty dire. There's more to the story though and those are two very specific points. Another important bit of data to consider is growth. Though Ingolstadt's market share may have dropped 25%, its sales have actually increased 29% more in the first 9 months of 2011 than it did in 2010 (223,631 units). Comparedly, Mercedes and BMW both sold 139,400 and 171,342 units respectively.
It wouldn't be terribly smart to discount the Bloomberg report outright and simply go on wearing rose-colored glasses as if there's nothing to be concerned about. Still, given Audi's status as being nearly the entire luxury market just a few years ago, it's not surprising that Ingolstadt is losing market share as consumers begin to have more choices. It's unrealistic to think everyone will drive Audi. So, yes, we do find the report to be a bit dire.
That said, Audi should be cognizant of the possible stodgy impression association with the government might bestow. No doubt, cars like the new A3 (shown above) and A7 will help build upon company's brand image. Photos like the one at the top of our story played well in the PR blitz around Chinese auto shows back in 2006, but are long gone from today's mix of photography coming from Audi.
Read the full Bloomburg BusinessWeek story HERE.
So what do you think? Is Bloomberg BusinessWeek on to something or simply dialing up the drama over the positioning of a hot brand like Audi in its largest market? We'd be curious to hear your thoughts.