World's Largest Audi Showroom Opens in Australia

Audi Australia recently unveiled the world's largest Audi showroom in the world in Sydney - dubbed in Audi lingo as "Audi Lighthouse". The "lighthouse" concept is a new corporate / brand identity for all new Audi showrooms. Prior to this, Audi also unveiled another "Audi Lighthouse" center in Shanghai, China.

The facility will not only house the sales and service centre but will also serve as Audi Australia's new corporate headquarters. As such, the facility is completely owned by Audi Australia and not by any dealer.


No doubt, the investment does not make any prudent financial sense and Audi
is not expected to fully recoup its investment in the near future. But there is a political dimension behind the building of this mega-showroom. Audi Australia, like many of its markets outside Germany and China (its 2 largest markets), feels that the brand is under represented and independent Audi dealers need to increase their investments in their facilities. The flagship Audi Lighthouse in Sydney will set a new benchmark for all dealers. Over the next 12 months, 7 out of the 34 Audi dealers in Australia will be either renovating or relocating their existing showrooms to a new "Terminal" style building.

In any car business, relationship between dealers and car distributor / principal is always tricky but both know very well that they need each other to survive. Dealers need the marketing support and vehicle allocation from the principal. It is impossible for distributors to completely undertake the task of selling cars in a country, on their own - not only does this distract car companies from the core business of building and designing cars, the capital investment required to setup and run 3S centres in all the major market centres is just too high. Lee Iacocca once said the dealers are your first customers, so take good care of them. In a large country like USA, where Lee comes from, dealers are even more critical. Cars delivered to dealers are considered sold.

But some form of presence under 100% principal controlled branch outlets is necessary to set a benchmark. In other words, it's the way car companies "bully" non-compliant dealers into meeting their standards. Left on their own, each dealer will end up doing their own thing and this lack of standardisation in operations is detrimental to the overall brand health. Customers will get a different level of service quality from one outlet to another.

Locally, the best example of this is to compare amongst the 3 main Japanese brands. Both UMW Toyota and Edaran Tan Chong Motor (Nissan) maintain a small number of 100% distributor owned outlets while Honda Malaysia depend completely on dealers run network. A couple of weeks ago an owner of a new City was complaining to me that Honda outlets don't follow a standard operating time. Some open by 8am, some by 9am. Some open on weekends while some don't. He works in sales and travels a lot, thus he does not service his car on any one single outlet all the time. So it's rather inconvenient for him. In the case of UMWT and ETCM - the difference in the standard of service between dealers and branches outlets is far lower.

Large Audi outlets in Malaysia (Euromobil owned) are still based on the 90s era "hangar" style concept. However given the low sales potential here relative to the larger markets, I doubt the bosses at Ingolstadt will turn their attention here anytime soon. Guess they need to put their more important markets in order first.

Audi Australia is part of the greater "Route 15" plan. The "Route 15" is Audi's corporate speak to attain its target of being the number 1 luxury brand in the world by 2015, by selling 15 million Audi cars globally. The brand has already conquered its domestic German market as well as China. Audi currently trails behind Mercedes-Benz and BMW but has overtaken Lexus in the Australian luxury car segment sales charts.

Audi's rapid rise in Australia has shaken up the status quo and attracted a fair bit of mud-slinging comments by bosses of Mercedes-Benz, BMW and Lexus. One former MD of BMW Australia even dismissed Audi as not a true luxury brand just on the basis that its cars are not RWD. Audi responded by posting a full page ad on the next day, with an Allroad and a caption below saying "Not RWD."

The boss of Lexus Australia too dismissed Audi's chase for numbers when Audi overtook Lexus and hinted that Audi cars are heavily discounted. He also said that Lexus focus is delivering customer satisfaction and not chasing a sales target. A comment which any business school student of any worth can tell is bollocks.

The head of Audi Australia, Joerg Hofmann, has this to say during the Lighthouse launch :
“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.