Audi's alliance with Google
02-01-2014, 10:23 AM
#41
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If volume is not as important to Audi as you claim, why then are they putting so much effort into less expensive cars? (A1, A3 and Q3) The other luxury car manufacturers are moving into the lower cost auto market as well. Lower cost cars can be an entry path to future sales of higher profit margin products.
I suspect they realize that more people want the quality and status that comes with owning an Audi but can't afford $50K+ for the privilege. This group could be the "way less income" Android owners you refer to. Having Google as part of those less expensive cars may help sell to this income bracket that is more familiar with Android powered devices.
The MQB and MLB platforms are another way that VAG could increase their sales volume. Fewer platforms to tool up for, less money spent for manufacturing capability, flexibility to create more widely appealing vehicles, lower cost to the customer and more customers buying your affordable products.
The article in HBR you read "ages ago" is referring to a business model that is being challenged. The profit and cash hoarding over all else way of thinking that has made Apple a huge boatload of cash ($160b) is on the way out. Perhaps Audi partnered with Google because they don't want to align themselves with that way of thinking.
I suspect they realize that more people want the quality and status that comes with owning an Audi but can't afford $50K+ for the privilege. This group could be the "way less income" Android owners you refer to. Having Google as part of those less expensive cars may help sell to this income bracket that is more familiar with Android powered devices.
The MQB and MLB platforms are another way that VAG could increase their sales volume. Fewer platforms to tool up for, less money spent for manufacturing capability, flexibility to create more widely appealing vehicles, lower cost to the customer and more customers buying your affordable products.
The article in HBR you read "ages ago" is referring to a business model that is being challenged. The profit and cash hoarding over all else way of thinking that has made Apple a huge boatload of cash ($160b) is on the way out. Perhaps Audi partnered with Google because they don't want to align themselves with that way of thinking.
02-01-2014, 11:33 AM
#42
AudiWorld Super User
If volume is not as important to Audi as you claim, why then are they putting so much effort into less expensive cars? (A1, A3 and Q3) The other luxury car manufacturers are moving into the lower cost auto market as well. Lower cost cars can be an entry path to future sales of higher profit margin products.
The car-sized A1 which it costs 38,855 Euro = $ 52,400 is an awful lot of money for such a small car
Cheap model is this Ambition 1.2 TFSI 5-speed, engine 63 kW (86 hp)
The price of the basic model without any equipment is € 18,150.00
Last edited by spijun; 02-01-2014 at 11:40 AM.
02-01-2014, 12:05 PM
#44
AudiWorld Super User
It is also a broad term
In Germany you can buy Q5 2.0 TFSI quattro for 38,300 EUR but also with additional equipment can pay 74,000 EUR
Or maybe A3 S-line 2.0 TDI quattro S tronic Price 52,350 EUR
Which means that the A3 expensive than the base model Q5 for 14,000 EUR
In Germany you can buy Q5 2.0 TFSI quattro for 38,300 EUR but also with additional equipment can pay 74,000 EUR
Or maybe A3 S-line 2.0 TDI quattro S tronic Price 52,350 EUR
Which means that the A3 expensive than the base model Q5 for 14,000 EUR
Last edited by spijun; 02-01-2014 at 12:52 PM.
02-01-2014, 02:27 PM
#45
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How about just base price to base price? You know, an oranges to oranges comparison without an endless discussion about this trim package vs that trim package vs options vs etc, etc, etc.
Audi USA A3 - $29,900/A4 - $ 33,800
$3900 difference between the A3 and the A4 could be the difference that makes a customer select Audi vs brand (pick one).
The point is that moving into the lower cost market will encourage more people to look at Audi instead of immediately dismissing it as an out of their reach choice. I believe that the Google partnership is a part of that marketing strategy.
Imagine this hypothetical scenario: a customer has a budget of $30,000 for a new car. He could buy a base model A3 or a CLA250. Imagine also that the A3 has Google integrated and the Merc has iOS. He also owns an Android phone/tablet as does his wife and 2.4 children. In essence, he has hitched his wagon to the Android universe and would (all other things being equal) likely choose the Audi. Why? By his previous purchasing choices, he has decided not to buy into the Apple way of doing things and those choices would likely carry over to the auto purchase decision making process. Conversely, if this guy had chosen Apple, he would likely buy the CLA.
Since mobile devices and cars are used in the same basic part of our lives, it is imperative for all auto makers to get involved with one or more of the mobile device OS providers. Android, iOS, Windows are the only real choices in today's market. Ford partnered with Microsoft several years ago because they were thinking ahead more than others. Audi had a choice to make: Android or iOS. They chose Android because it fits into their long term marketing goals.
Or maybe, I am simply stating my opinion because it fits the facts as I see them.
Audi USA A3 - $29,900/A4 - $ 33,800
$3900 difference between the A3 and the A4 could be the difference that makes a customer select Audi vs brand (pick one).
The point is that moving into the lower cost market will encourage more people to look at Audi instead of immediately dismissing it as an out of their reach choice. I believe that the Google partnership is a part of that marketing strategy.
Imagine this hypothetical scenario: a customer has a budget of $30,000 for a new car. He could buy a base model A3 or a CLA250. Imagine also that the A3 has Google integrated and the Merc has iOS. He also owns an Android phone/tablet as does his wife and 2.4 children. In essence, he has hitched his wagon to the Android universe and would (all other things being equal) likely choose the Audi. Why? By his previous purchasing choices, he has decided not to buy into the Apple way of doing things and those choices would likely carry over to the auto purchase decision making process. Conversely, if this guy had chosen Apple, he would likely buy the CLA.
Since mobile devices and cars are used in the same basic part of our lives, it is imperative for all auto makers to get involved with one or more of the mobile device OS providers. Android, iOS, Windows are the only real choices in today's market. Ford partnered with Microsoft several years ago because they were thinking ahead more than others. Audi had a choice to make: Android or iOS. They chose Android because it fits into their long term marketing goals.
Or maybe, I am simply stating my opinion because it fits the facts as I see them.
02-01-2014, 04:23 PM
#47
AudiWorld Senior Member
Here in the US the price for Audi Connect has been lowered to $15/mo. with a 30 month subscription.
Last edited by Q5 Bob; 02-01-2014 at 04:25 PM.
02-01-2014, 05:16 PM
#48
AudiWorld Super User
"If volume is not as important to Audi as you claim, why then are they putting so much effort into less expensive cars?"
I think you are misconstruing "volume" and "less expensive".
http://www.forbes.com/sites/joannmul...ceably-harder/
According to VW's #1 man, VW is their volume product, and Audi is a luxury brand. Luxury brands are never volume products, in the larger market. "Volume" is relative and while Audi might want to outsell competitors, I can assure you that they prefer to make higher profits than their competitors--not just pump out product.
Every once in a while someone in the car business makes a blunt remark, confirming that the profit margins (to the maker, not the dealer) can be 50% on a luxury car or truck against 5-10% on their volume products. The numbers vary, the bigger picture never does.
If Audi's real concern was volume, all they'd have to do is drop their pants, ergh, price, and...oh, wait a minute, they can't sell many more cars than they already do, until new production comes online. I understand there's a plant producing Q5s in China as of this year, that should help both volume and profit. But they still can only sell so many cars in the US every year, they have to find someplace to build them first and "AUDI, MADE IN CHINA" might not help that even if they were foolish enough to try it.
A bigger market share does not translate into a high-volume product.
I think you are misconstruing "volume" and "less expensive".
http://www.forbes.com/sites/joannmul...ceably-harder/
According to VW's #1 man, VW is their volume product, and Audi is a luxury brand. Luxury brands are never volume products, in the larger market. "Volume" is relative and while Audi might want to outsell competitors, I can assure you that they prefer to make higher profits than their competitors--not just pump out product.
Every once in a while someone in the car business makes a blunt remark, confirming that the profit margins (to the maker, not the dealer) can be 50% on a luxury car or truck against 5-10% on their volume products. The numbers vary, the bigger picture never does.
If Audi's real concern was volume, all they'd have to do is drop their pants, ergh, price, and...oh, wait a minute, they can't sell many more cars than they already do, until new production comes online. I understand there's a plant producing Q5s in China as of this year, that should help both volume and profit. But they still can only sell so many cars in the US every year, they have to find someplace to build them first and "AUDI, MADE IN CHINA" might not help that even if they were foolish enough to try it.
A bigger market share does not translate into a high-volume product.
02-01-2014, 06:54 PM
#49
AudiWorld Super User
Even more foolish than China, Mexico...
Agreed meanwhile with many of your general points.
02-01-2014, 06:59 PM
#50
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I intentionally did not bring VW into this conversation since this thread is about Audi's alliance with Google, not VW. While there may be some trickle up or down to the rest of the VW Group in the future, Audi is the only one that is publicly claiming this connection.
What purpose do any of the premium manufacturers have for lower priced cars then? Why not have everything priced out of the reach of everyone that cannot afford an R8 5.2? Because they are in business to sell cars to the target groups they choose. Recently, Audi has chosen to market to people that want the prestige and quality that Audi offers but can't afford $50k+ cars. Yep, there's that higher volume concept again.
Will there ever be an Audi competing directly with Kia and the like? Probably not since that would be a market segment that other members of the VW Group are intended to compete in.
You say it is not possible for Audi to sell more cars in America until more production comes online. I agree. That would explain the $1.3b they are investing in a Q5 production facility near San Jose Chiapa, Mexico due to come on line in 2016. 150,000 more Q5's a year supplying all markets but China sounds to me like they are trying to increase the volume of product they have to sell. Will a Mexican produced Q5 be priced less than an Ingolstadt produced model? I wouldn't think so but, what it does do is help relieve the lack of volume the US market is currently experiencing for this model.
http://www.audi.com/com/brand/en/com..._strategy.html
The section on continuous growth is especially relevant to this conversation.
So that this rambling post stays somewhat in the spirit of this thread, I offer the following excerpt from the above linked page.
"Reflecting the increasing connectivity and digitalization of our society, the Company uses the umbrella term Audi connect to group together all functions that connect the driver with the Internet, the car and the world around him or her. As well as trailblazing assistance and infotainment functions, driver-friendly Internet and smartphone applications are integrated into the vehicle."
Sounds like what Google brings to the table,eh?
What purpose do any of the premium manufacturers have for lower priced cars then? Why not have everything priced out of the reach of everyone that cannot afford an R8 5.2? Because they are in business to sell cars to the target groups they choose. Recently, Audi has chosen to market to people that want the prestige and quality that Audi offers but can't afford $50k+ cars. Yep, there's that higher volume concept again.
Will there ever be an Audi competing directly with Kia and the like? Probably not since that would be a market segment that other members of the VW Group are intended to compete in.
You say it is not possible for Audi to sell more cars in America until more production comes online. I agree. That would explain the $1.3b they are investing in a Q5 production facility near San Jose Chiapa, Mexico due to come on line in 2016. 150,000 more Q5's a year supplying all markets but China sounds to me like they are trying to increase the volume of product they have to sell. Will a Mexican produced Q5 be priced less than an Ingolstadt produced model? I wouldn't think so but, what it does do is help relieve the lack of volume the US market is currently experiencing for this model.
http://www.audi.com/com/brand/en/com..._strategy.html
The section on continuous growth is especially relevant to this conversation.
So that this rambling post stays somewhat in the spirit of this thread, I offer the following excerpt from the above linked page.
"Reflecting the increasing connectivity and digitalization of our society, the Company uses the umbrella term Audi connect to group together all functions that connect the driver with the Internet, the car and the world around him or her. As well as trailblazing assistance and infotainment functions, driver-friendly Internet and smartphone applications are integrated into the vehicle."
Sounds like what Google brings to the table,eh?