Michael Perschke, head, Audi India
Audi India's chief speaks to Hormazd Sorabjee about how an India-specific market strategy and savvy brand-building have paid dividends on the road to No. 1.
It’s called the ‘char bangdiwaligaadi’ or the car with four bangles, not just in metro cities but also across wealthy swathes of the hinterland. What better proof then that Audi has well and truly arrived as a status symbol among India’s neo-rich. If more proof is needed, just glance at the sales numbers – Audi has breezed past BMW to emerge as the leading luxury carmaker in India in financial year 2012-13. Audi had openly stated that it wanted to become the best-selling luxury brand in India by 2014-15. It was a target skeptics felt Audi could never achieve but it did and a whole two years earlier. What makes this achievement even more remarkable is that Audi was the last of the German ‘Big Three’ to enter India and was a completely unknown brand when it officially started operations in 2007. In fact, in an attempt to spark some brand recognition and make some sort of connection in cricket-crazy India, Audi hyped up the iconic Audi 100 which Ravi Shastri won for taking the ‘Champion of Champions’ title at the 1985 World Championship of Cricket in Australia. But today, just six years since its India debut, Audi has driven deep into the minds and hearts of luxury car buyers and has the same (and in some cases better) top-of-mind recall as Mercedes-Benz and BMW.
“We have been the last of the German brands to enter the Indian market and we got to the No. 1 spot, not just by sheer luck, but because of a lot of initiatives we tried, worked and took us to a tipping point where the market responded extremely positively,” says Michael Perschke, head, Audi India, and the man who has almost single-handedly taken his brand to new heights.
What’s the secret behind Audi’s success? Perschke believes it’s focus and strategy. “The first thing is that you have to have a specific strategy for India; you can’t simply cut-paste a European or Chinese strategy and expect it to work. So, the focus of our Indian strategy has been careful brand-building and brand for us is very closely linked to the product portfolio,” he says. Perschke firmly believes that a ‘top-down’ strategy of product launches is what has established Audi as a very aspirational brand. The carmaker began with the massive Q7, its top-of-the-range SUV that was first bought by celebs like John Abraham who set off a trend that arguably made it the de facto SUV for Bollywood stars.
The Q7 was instrumental in building aspiration for Audi’s SUVs and this sense of premium-ness has rubbed off onto the Q5 and Q3. It’s been the same story with Audi’s A range – the A8 was the brand-builder followed by the A7, A6 and the face-lifted A4. The Q and A range are now the two pillars that the carmaker stands on, accounting for 95 percent of its sales while the balance is taken up by niche models like the TT, R8 and RS.
Perschke believes that dealer development is another key to Audi’s growth in India. He says, “When I came in July 2010, we had 10-12 network points. We have 26 now and by the end of the year, we will have 33-34 points.” However, Audi still trails behind both Mercedes and BMW in total number of sales and service outlets but the gap is closing at a rapid rate. Each new dealer is adding to the overall sales volumes and clearly expansion of the dealer network has given Audi additional sales outside of the big cities and in Tier 2 cities like Kanpur and Karnal.
Critics, however, are quick to point out that Audi’s cash-rich parent in Germany is happy to indulge its Indian child and hence Audi India has simply gone out and bought market share by offering huge discounts and freebies. No doubt, Audi is in the thick of the intense price war among the luxury carmakers but Perschke says that discounts alone can’t build a brand in the long run. “It’s true we offer sweet deals but they are usually tactical, like with the run-out of a model like the old A4 or a loyalty offer that we do. We never advertise any discounts but always advertise the value package. If you see the latest A6, we advertise the EMI scheme and the bells and whistles you get in this package.”
However, Perschke concedes that giving a deal is part of the game in India. “You have to understand that every person who buys a luxury car in thinks of himself as a smart business person and wants a deal. In fact, everyone wants a deal – from Union ministers to Bollywood stars!” Perschke has understood that he has to pamper some of his key customers who in effect are his brand ambassadors. For example, he arranged an Audi for Abhishek Bachchan in London to take him around town and to the UEFA Champions League 2013 finals in May.
“You sometimes have to give special feel-good-deal factors. Does it have to be pure cash discounts? I believe an interesting package which includes service rates, extended warranty and such has more value than a pure cash discount. But with sweet deals alone, you cannot maintain a strong brand. We see that our brand is getting stronger and stronger. According to our studies for unprompted awareness, we have already overtaken one of our competitors and we are behind the other by just a few basis points. So while discounts are offered for various reasons, it cannot be on top of your mind for a strategy,” explains Perschke.
JUMPING THE Q
To get more volumes, luxury carmakers have to look beyond offering deals and discounts if they are to survive in the long run. It’s now a race down the pyramid to reach a wider base and find a new lot of customers – those who never thought of buying a premium brand before. Mercedes has taken an aggressive lead by launching the A- and B-class while BMW will bring in the compact 1-series next month. Audi’s response? “I am not coming with a me-too A3 Sportback (hatchback) approach,” says the Audi India boss, who also feels that even the baby A1 isn’t appropriate because it won’t be able to sell in huge volumes to justify the resources needed to launch it. Instead, in a surprise move, Audi is attacking the base of the luxury pyramid with the Q3 Sport, the entry level variant of the baby SUV. “The Rs 20-25 lakh space is getting crowded with the A-class, B-class, 1-series and V40. They are all essentially hatchbacks but I am coming with an aggressively priced Q3 – so you get the real thing and I can still give you more than what the competition gives at the same price-point,” points out a confident Perschke.
It’s also from a strategic point of view that Perschke believes the Q3 is the right answer to the luxury hatchbacks from Mercedes, BMW and Volvo. “You always have to look at the sweet spots and examine what they exactly are. Is it the body concept, the drivetrain or is it a kind of design which differentiates you in that segment? For Audi, we had to decide if we should broaden our portfolio with more and more products or should we be focused. To me, it was clear that we should be focusing on our existing portfolio because the broader you go with new product offerings, you stretch yourself very thin because each of the product lines needs a certain level of attention. Instead, why not create a sub-segment within a segment, where that new sub-segment is in the Rs 25-lakh bracket? This is a very interesting price-point because it makes the Q3 within reach of company car buyers whose ceiling is typically around the Rs 25-lakh mark. This also opens up a completely new market of non-luxury intenders or people who might have never even thought of a Q3 because it starts at Rs 30 lakh.” But will the understated Q3 be seen as an alternative to the stunning-looking (and cheaper) A-class? Or can an SUV be seen as a better option to a hatchback? The A-class for now seems to be the flavour of the month, having racked up 400-plus orders in the first 10 days since bookings opened.
Perschke is not perturbed. “You get the highest price elasticity with an SUV because that’s the body style with which you sell the highest image, followed by a saloon and then a hatchback. So I see a hatchback at Rs 22-24 lakh challenging because the Indian market is not educated at that price- point. SUVs have a certain premium; therefore, in any segment that we enter, we prefer to launch an SUV first, followed by a saloon, and lastly a hatchback.” In fact, Perschke hints that the baby Audi Q2 SUV is likely to come to India before the A1 hatch.
So for now, it’s the Q3 Sport that is Audi’s main weapon in the Rs 25-lakh battle, the winner of which could emerge as the number one luxury brand in the country. Audi, for one, is not prepared to abdicate its crown in a hurry and has painstakingly specced the Q3 Sport to ensure that it is brilliant value. This pared-down Q3 is essentially a 140bhp, two-wheel drive, manual transmission version of the regular Q3 but with a level of equipment that isn’t exactly Spartan. “When we did our research, one thing was very clear – customers do not like a car with a low level of specification. So even in the Q3 Sport, we have included traditional Audi features like leather seats, MMI and climate control. The car will not feel de-specced in any way and at this price-point it will be a game-changer for Audi,” says Perschke. Whether Audi’s googly clean bowls Mercedes and BMW remains to be seen but one thing is certain – Michael Perschke will launch the Q3 Sport with all guns blazing. The Audi India chief has seemingly mastered the winning formula and the art of spinning rings around the competition.
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