VW/Audi “UPs” the electric ante — Q1 2010 Update
No doubt that Audi started the year off with a bang. Audi with VW, Mercedes, and BMW have all been pushing diesel-powered cars lately, and even Porsche has joined in the party. But the Audi A3 has been a “slow seller” for Audi in America. It sells massively in Europe where petrol prices are sky-high but Audi has likely been looking for new ways to move the car on this side of the pond. That said, the A3 diesel seems like a good option – it’s relatively spacious and gets real-world gas mileage every bit as good as a Prius.
Observers were no doubt surprised to see Audi spending serious buck at the Super Bowl to promote the clean diesel technology. Indeed, Audi’s humorous “green police” commercial was well composed and sent the message that diesel is the new hybrid. Indeed, it is still cheaper technology as well.
The former LA Times auto reviewer Dan Neil has noted:
Although disavowing any nationalistic subtext, “we looked at it as a political campaign,” says Scott Keogh, chief marketing officer for Audi of America. “We wanted to make diesel a much bigger idea that people could rally around.”
The initial stage of Audi’s diesel campaign scored big. The company got more than 300,000 Facebook visitors in the first month and traffic to the brand’s U.S. website jumped 267%, with a total of 120 million media impressions, Keogh says.
Interestingly, the Audi website mentions its diesel competitors, and the tenor of the campaign is generally more about supporting diesel per se. “We’re OK with that,” Keogh says. “Anything that says that diesel is the right thing to do, we’re in favor of. Later, in late fall ’09, when the A3 TDI [a premium hatchback] comes out, then we’ll get into ‘Why Audi?’ “
All this leaves the other two high-end German carmakers on the sidelines, comfortably. Mercedes-Benz was the first company to offer a 50-state clean diesel two years ago (E320 BlueTec), and now sells three diesel models. The company has done some diesel-specific marketing, but Mercedes-Benz USA spokeswoman Donna Boland says, “The most effective way to convince someone that diesel is right for him or her is to get them behind the wheel.”
Meantime, says Boland, “the [diesel] advertising has a cumulative effect in creating positive interest in diesel and therefore more floor traffic.”
The company that stands to benefit most from the Germans’ diesel push is one least associated with diesel: the sports-car maker Porsche. The diesel Cayenne SUV accounts for 60% of the company’s sales. And even though the car is 28% more fuel-efficient than the comparable gas model, in the U.S., “there is not currently a business case for this car,” says Porsche product engineer Michael Leitners. “We wish there were.”
(http://www.latimes.com/business/la-fi-ct-neil1-2009sep01,0,4467832.column)
In contrary news, Audi has on the one hand put down electric vehicles, something that EVP of Audi USA Johan de Nysschen has downplayed in recent statements. Curiously, Audi head Rupert Stadler also said in Auto Car in December 2009 that he did not see the company following BMW in marketing itself as a “green” car company. (http://www.autocar.co.uk/News/NewsArticle.aspx?AR=245611)
Surely, some could argue that diesel is not green, just more “eco-friendly” than petrol. But if that is the case it is curious that Audi produced the E-Tron concept car for the IAA in Frankfurt 2009 and then announced at the LA Auto show that they would be producing 1000 E-Trons under the R4 nameplate. (http://www.leftlanenews.com/audi-planning-1000-unit-e-tron-production- run.html and http://www.leftlanenews.com/audi-e-tron-heading-to-production-under-r4- nameplate.html)
Curious then that a company seemingly uninterested in being branded as “green” would then set out to produce a very green vehicle. That strategy began to unfold in February when Audi announced a new car division called E-Tron. The new division will produce up to 1,000 unites annual and include the E-tron from the Geneva show (or a similar model) at a jaw-dropping $160,000 or more.
Automotive News notes:
“Audi of America President Johan de Nysschen said Audi will price its first e-tron vehicles high because lithium ion battery technology is expensive and needs further development. He said the first car will cost more than any Audi now sold.
De Nysschen said he sees Audi developing smaller compact electric cars eventually. “At the other end, electric cars will be more utilitarian short-driving range commuter vehicles,” he said. “These have lower levels of technology and there is a reduced cost.”
De Nysschen said the two poles will converge and a mass-market electric vehicle would hit the price point “where it is more feasible for a family car.””
(http://www.autonews.com/apps/pbcs.dll/article?AID=/20100215/COPY02/302159856/1193#ixzz0j3qCy8wn)
To follow that announcement, Audi did indeed produce another E-Tron car, a new electric A1 model. The model was announced at the Geneva Auto Show in early March. Audi says that the A1 e-tron will be capable of sprinting to 62 mph in an acceptable 10.2 seconds. Audi says the Wankel-powered generator will give the A1 e-tron an additional 155 mile range, and a final fuel consumption rating of 123.8 US miles per gallon.
(http://www.leftlanenews.com/audi-a1-e-tron.html)
The overall strategy for Audi is changing as a result of these product introductions. Audi’s parent company, VW Group has said it wants to be number one in hybrid and electric cars. VW brand will launch the electric Jetta for the US market in 2013.(http://www.autonews.com/apps/pbcs.dll/article?AID=/20100315/OEM06/303159959/1143)
Perhaps the biggest question for Audi is, “Can Audi be competitive with electric cars?” Audi is hardly the first player to this game. American car makers Tesla and Fisker have long had working prototypes of their cars, fully electric and electric plug-in, respectively. Tesla has been selling their car in showrooms around the world for over a year now. Fisker plans to match that (providing they develop a decent dealer network) by the end of 2010. The former LA Times writer Dan Neil’s assessment matches our own here at Beyond the KM, which is that carmakers like VW/Audi, BMW, and Mercedes have more than enough research and development resources to develop any type of vehicle they wish, whether it be electric, hybrid, hydrogen, or powered by magic.
The bigger question for these German automakers is whether an electric car project can be anything more than a concept study. Is the world ready for tens or hundreds of thousands of electric vehicles to take to the roads? Does America or Europe even have the electrical grid capacity to accommodate these vehicles? And what of charging them? How can the automakers gain anything more than niche acceptance for a car that takes an entire day to charge?
Nissan certainly thinks they have the problem solved. They are introducing a US$32,000 car called the Leaf. It runs solely on electric power, and will cost only US$20,000 base in California, after rebates. The rest of the country will still get US$7500 in tax credits if they buy one. It surely beats the US$109,000 price tag of the Tesla Roadster.
Clearly, Tesla and Fisker have some major financial backing, smart human resources, and a desire to change the face of the otherwise environmentally un-friendly industry. To be successful ultimately, two things need to happen. First, the companies need to diversify their products and introduce products that consumers can afford/maintain and lust after. VW plans to bring more resources in-house to garner competitive advantage. Salzgitter, Germany’s VW factory will become dedicated to building electric vehicles, including the limited test run of VW Golfs, due to be distributed for real-world testing at the end of 2010. Never before has VW or any other European automaker been so serious about alternative powertrains. (http://www.leftlanenews.com/vw-moves-ev-operations-in-house.html)
Second, the infrastructure needs to come into place on the part of government to assure that electricity, or hydrogen, or whatever the fuel medium, exists in prevalence throughout the country. No doubt that these companies are as dependent upon the government for infrastructure as the government is dependent upon the carmakers to innovate.