Published on August 23rd, 2017 | by Subhash Nair1
Audi Malaysia Has Got it All Wrong… What They Need is More S, RS and quattro
In Malaysia, the premium market segment is VERY hotly contested. Mercedes-Benz and BMW take turns every decade to establish dominance, while Audi, Volvo, Jaguar-Land Rover, Lexus and Infiniti fight for the scraps. Either one of the top two premium carmakers can easily outsell these other 5 competitors in Malaysia COMBINED on any given year. In the first half of 2017, Mercedes-Benz and BMW sold approximately 6 and 5 cars respectively for every 1 car sold by ALL these other brands combined. That’s the unfair reality.
This isn’t an article that’s set up to insult these other premium automotive brands. They all make competitive, competent products. They each know what they are doing. They each have their own local office and individual strategies to deal with the smaller volume of sales. Some brands are shrinking, some are growing, some are maintaining their volumes.
But crucially, one of these brands isn’t quite living up to our expectations. It’s Audi, who are officially represented by Audi Malaysia. While their competitors run lean and expand with caution, Audi Malaysia keeps trying to break into higher volume sales, but we feel this isn’t the right thing to do given the reality we described in the first paragraph.
Here’s our take on how we think Audi ought to do things based on some of the realities of their brand and the Malaysian car market.
Focus on Developing a Local Understanding of Your Brand
The Audi brand has come a very long way. In Europe, the US, China, Australia and many other parts of the world, Audi has been seen as a genuine competitor of Mercedes-Benz and BMW. And YES, they are a genuine competitor, product-wise. Their cars are competitive and have been competitive for decades with these other premium German brands.
The problem is that in Malaysia, they only really made their presence felt after the first R8 around 2008.
That was the first time many Malaysians saw the beyond the number of rings in the brand’s logo and accepted Audis as viable Benz/Bimmer replacements. Prior to this, Audi had a similar standing to Saab. It was for weirdos who paid extra for cars that just weren’t easy to maintain in Malaysia.
Plus, by the late 2000s, the prefacelift E90 3-Series and W204 C-Class were getting to be a little boring in the looks department.
The Audi A4 (B8) came in with R8-style daytime running lights to save the day.
Then the A6 Hybrid came in to save the environment (before the competitors did hybrids, mind you).
Then the TT came in to make some average drivers feel like great drivers.
Then the R8 came allowing some owners to take on the feel good role of Iron Man.
We even saw the Q5 at the time where the SUV boom was just about to take off.
Of course, a lot of the work here was done by parallel importers, so we can’t really give all the credit to the official reps.
In any case, a handful of better alternative products brought the brand to the attention of many Malaysians… but frankly, that’s not enough.
BMW and Benz have been at it for DECADES in Malaysia. They have invested millions in Malaysia and not just in terms of brand marketing. They’ve built plants & facilities, trained aftersales personnel, cultivated arts programmes.
There are Malaysians whose families have worked for these brands for generations! One of them put their logo on a cliff in Ipoh and the other one put a smug sense of superiority in every fanboy’s heart. They’ve been doing the work here to assure Malaysians that they’re both here to be better than each other.
And look at those four models that built you up. Where are they now? The A4 is trying to steal away sales but with CBU pricing, everyone knows it’s a lost cause. The A6 has disappeared behind the Volvo S90/V90, E-Class and 5-Series launches.
The R8 and Q5 are absent and grey market importers have yet to bring them in for some reason. The TT is around but its presence has been more helpful in lowering prices of the previous gen TT in the grey market than in generating sales of the new one.
Audi Malaysia simply needs to keep building the brand’s reputation. They need to keep asking themselves what their brand can offer and why an average BMW or Mercedes owner would buy an Audi.
Right now, a potential customer isn’t asking himself if it makes more sense to buy an Audi over a competiting product. In fact, the Audi brand only comes to mind when he watches Marvel movies. And you know what he sees when he watches Marvel movies? Your HERO products like the R8 and A8. Which aren’t even here.
Bring In Your S, RS, and Avant Variants
S and RS Absent
Audi has some serious firepower at their disposal. For every AMG or M car, there’s something with four rings that can give chase. We even venture to say the build quality and material selection in high-end Audis surpass what the competition has.
And Audi won’t even need a fancy sub-brand to do battle with BMW M or Mercedes-AMG. RS and S variants can easily fight the competition off without needing to spend money educating the public on what ‘RS’ is or stands for. If they see RS cars smoking the competition on the PLUS highway, they will go on google and find out themselves.
Earlier this year we went to the North Pole to drive on a frozen lake in some amazing Audi S4 Avants.
It was magical. The cars were out of this world. The experience was out of this world. Were we expecting S4 Avants to make a surprise appearance in Malaysia?
Well, no. But we weren’t expecting to go driving on a frozen lake in the North Pole either. So maybe miracles can happen.
And from a business point of view, miracles aren’t miracles. When you break ‘miracle events’ down, you’ll see all the steps that go into how it happens. You need to find a way to make cars like the S4 Avant happen in Malaysia. Because that’s the kind of spectacle necessary to change the way Malaysians approach your brand. And if that change happens, then it is worth the effort and cost.
You’re the only German carmaker that consistently gets the wagon shape right across every generation, and yet there are no wagons in Audi showrooms here. Even Volvo has proudly brought in the V90. Whether it sells or not isn’t part of the equation. They understand that the hero products need to be seen.
Tap into the SUV buyer’s mindset
Is there a business case for Audi wagons? I don’t know. But if you can convince superstitious people to ignore the four rings on the bonnet, you can convince them to get into something coffin shaped.
People use the ‘I want to buy an SUV’ argument because in their minds SUVs are more spacious and safer.
As a carmaker, Audi knows that wagons, compared to crossover SUVs are often more spacious or at least more practical because of the lower loading height. They must also know that without electronic aids, a vehicle with a lower center of gravity is safer. Of course, with the electronic aids, the difference is negligible. But there are definitely arguments for wagons that can be put forward.
The point is that your most beautiful, powerful, desirable variants need to be here for your brand to thrive. Think about the hardcore Audi fans who are waiting for these cars. They’re only going to think about buying a new car every 5-7 years. When that opportunity comes, will the product be available in the showroom or at a recond car lot? If it’s not available at all, well, how easy is it going to be for them to walk into a Benz showroom and get a AMG 43, 45 or 63 competing product because that range is well-represented and supported.
Where Are The Q5 and R8? Bring them Before the Hype is Over
Will Malaysians buy the new R8? Let’s look at the situation. There are, without a doubt, more first generation Audi R8s on Malaysian roads than there are BMW i8s or Mercedes-AMG GTs. I don’t have the stats, but a weekend in the city should give you an idea. For every one i8 or GT, you’ll see 3 R8s or more. How do you not see the replacement as a viable product here?
The Q5, on the other hand, is missing out on a huge wave of SUV demand. Right now it looks like BMW will show up with the new X3 before your Q5 makes it to our shores despite having MONTHS of lead time. The SUV wave is real, guys. You have to ride it and milk it while demand is still there.
Stop Chasing The CKD Rabbit, Embrace the CBU Advantage
Audi doesn’t have the sales volume to justify the investment needed for local assembly. And without local assembly, they don’t have the tax breaks to justify lower prices which would lead to higher sales volumes.
It’s an endless loop, and we understand why it’s difficult to get the folks in the Ingolstadt offices onboard.
Every year we wait, you wait and your customers wait for CKD pricing. But as long as you’re in this position, you may as well take advantage of it.
Every single one of your cars is assembled in Germany. Do you have any idea how suspicious Malaysians are of Malaysian workmanship? Exploit this weakness. Reinforce the fact that the cars you sell here are built next to cars you sell in the UK.
Reinforce the fact that there’s no chance you’re treating Malaysia like a dumping ground for older engines and tech. Yes, they’re paying more for your vehicles, so SHOW them what they’re paying for. Giving potential customers a sense of superiority is very important in this segment. Do Malaysians even know how legendary your cabin quality is?
CBU also gives you an opportunity to experiment. You can bring in variants that Malaysians haven’t seen. Bodystyles that Malaysians aren’t used to. Bring them in in small batches, see what sells and why. This is something product planners who deal with CKD operations cannot afford to do.
Yes, it might be costly, but think of it as a long term experiment and record data. It will pay off in 10, 20 years when you have actual insights on local tastes.
Distance Yourself From Volkswagen
By now, most car buyers are aware of Audi’s relation to Volkswagen Group. But not many Malaysians distinguish between Volkswagen Passenger Cars and Volkswagen Group, which are completely different things.
Volkswagen Passenger Cars are climbing out of their own situation and they have their own perception issues to deal with. They have their own strategy to win back customer confidence. But their problems are not your problems.
Yet everytime there is a Volkswagen issue, where do customers go to protest? Menara VW. Which is where your HQ is. Sharing a building may save the brand on rental cost, but it is not helping with brand-building.
We’re not saying you should calculate the distance between Wolfsburg and Ingolstadt and apply that here, but some distance is needed. Look to any of your sister brands within the group for advice.
Because Audi’s engineering team is distinct and operates on a higher level and build cars to higher tolerances and spec. Even with a few shared parts, the difference between an Audi and its Volkswagen counterpart is night and day.
But people will believe whatever they want to believe. People who open up the rear cupholders in the A6 and see the same cupholders that you find in the B7 Passat will jump to their own conclusions. People who see an A4 cost more than a B8 Passat with more equipment will scratch their head and ask where the money goes.
Sharing ANYTHING at all with VPCM is not good for your brand. Keep your distance in every way that you can control.
I’m not an expert on these things. You guys, Audi Malaysia, are. But I think some of my points definitely merit attention. But the way I see it, Audi is here for the long term and can afford to invest with long-term thinking.
Yes, bringing in a large fleet of mostly very different models requires a large initial investment. It’s easy for us plebs to think of the A4 1.4TFSI, A4 2.0TFSI, A4 2.0TFSI with quattro, S4, S4 Avant, RS4 as just variants of the same model, but to Audi Malaysia, each of those will have a load of red tape and individual costs stapled on.
But we’re not asking for the entire catalogue here. We’re asking for a shift in product strategy.
And we’re not asking this because it will mean yummier test cars, because testing a car is a transient experience that doesn’t put food on the table.
What we’re asking is to save your own brand, because healthy competition is in the interest of the entire industry. And it’s getting to feel like the grey market had a better strategy for Audi 5-6 years ago than Audi Malaysia does today.
To compete effectively in the next few decades, you have to go back to brand building here.
The Malaysian Total Industry Volume is shrinking, which means less money to spend in the middle. But the millionaires and billionaires in the country are still going to be spending big sums.
Give them something special to spend on. Let the small volume of absolutely mind-blowing S and RS Audis take on the massive quantity of entry level competitors. Road goers will see your cars doing great things and draw their own conclusions.