International Newsmaker Q&A: Brad Stertz

To what do you attribute the success of your diesel in the U.S.? What steps did you take to overcome consumer resistance to this type of fuel?

We saw that merely offering clean diesel as just another engine choice wasn’t going to overcome misperceptions in the mind of most Americans – misperceptions based on the poor performance of diesel technology a generation or more ago. So when we launched our first diesel models in 2009 we launched an aggressive education campaign that put a spotlight on the fuel economy benefits. We highlighted a U.S. government estimate that Americans could save 1.5 million barrels of oil a day if one-third of the vehicles on the road were clean diesel models. So it became a powerful energy independence message. We bolstered that by noting the substantial greenhouse gas savings diesel tech offers.

When we started we felt we’d be fortunate if TDI clean diesel models made up 18-20 percent of the sales mix for the models offering that engine choice. Last month, the A3 TDI model constituted 66 percent of all A3 sales.

Do you anticipate introducing additional diesel models to the U.S.?

We plan to at least double our TDI offerings by the 2013 model year.

How would you rate the results of Audi’s much-publicized 1,000-mile “green tour” of California? How would you rate clean diesel’s future as a viable fuel choice in the U.S.?

We completed the demonstration drive without any noticeable differences in performance. We used RenDiesel, produced by LA-based Rentech, Inc., and it achieved fuel economy nearly as good as traditional diesel. This was the biggest surprise as we expected a modest drop in fuel economy because the synthetic fuel is less energy dense.

Audi AG is very interested in developments with this type of fuel technology. It remains to be seen how it works in cars over hundreds of thousands of miles of driving. Rentech recently tested one of the cars from the California tour in a drive stretching from its Colorado refining facility to the Washington, D.C. auto show. No problems reported!

Audi believes the potential is there to develop a renewable fuel that can be produced from America’s vast natural gas reserves or even biomass, such as lawn waste. What’s more, the emissions profile of fuels like this promise to be substantially cleaner than any other choice – in some cases it can be cleaner than an electric vehicle.

Could you describe some of your social media marketing initiatives, particularly the sales campaigns that went especially well?

Our most notable social media campaign was the Facebook petition drive aimed at convincing Audi AG to bring the TT RS sports car to the U.S. market. More than 11,500 people signed up, including a number of people eager to put a deposit down immediately. This truly helped tip the decision to sell the car here later this year.

We have a full menu of social media surrounding our Super Bowl activities. (See details here: http://www.audiusanews.com/pressrelease/2213/93/audi-announces-social-media-plans-super-bowl-xlv)

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How did you manage to reach your targeted demographics within the social media realm?

That’s a matter of continuing focus. As you might guess, the demographics of heavy social media users skews younger than the typical U.S. luxury car buyer. There’s still benefit in standing as the aspirational luxury car for this younger audience. But we’re also working on ideas to form stronger online communities within our vehicle ownership groupings.

How did your social media activities compare with promotional efforts in the traditional media?

We invested aggressively in digital media – both in terms of online advertising and social media activities. We don’t reveal our budgets, though.

Could you describe your global Audi Terminal design philosophy for new dealerships? Are you currently seeking new dealerships?

The most visible sign of the comprehensive quality of sales campaign is the Audi terminal. Its visionary architecture, with a multilevel design that can be flexibly adapted to the given conditions, was designed for downtown locations. With its help, Audi is moving from the periphery into the city – and thereby follows its customers. Instead of a singular showpiece building at corporate headquarters, it brings sophisticated architecture to hundreds of dealerships worldwide.

“For us, it is about bringing the brand to our customers, with trendsetting dealerships that put people into the focus,” said Peter Schwarzenbauer, Audi AG board member in charge of sales and marketing. Audi AG is accompanying the movement of the terminals into the cities with greater emphasis on advertising in metropolitan areas. Added Schwarzenbauer: “We will communicate even more clearly what makes Audi the most progressive premium car brand in the world.”

To what extent were your existing dealerships remodeled? Does a refurbishing fit into the global Audi Terminal design philosophy?

Between 2008 and 2010, Audi dealers in the U.S. have invested nearly $171 million in their facilities, not including land prices and employee costs. We now have 276 dealerships, 145 exclusive. At the end of 2010, 224 of our dealerships provide our customers with an exclusive or brand-dedicated experience. At the end of 2010, more than 79 percent of our unit sales will take place at an exclusive dealership.

What are some of the features of your new or remodeled dealerships that have contributed to attracting customers to Audi?

It’s a clean, consistent look that reflects the brand image whether you are in New York, Tokyo, Munich or Kansas City. It’s a modern architecture theme that also ties in some elements of our 24 Hours of Le Mans heritage with a unifying angled wall.

You were at the Specialty Equipment Market Association (SEMA) Show for the first time in 2010. What was your target audience? Was it geared more toward consumers or aftermarket professionals?

We wanted to show Audi enthusiasts and potential customers that there are a range of choices to add individual flair to their cars – from factory installed options to dealer equipment to third-party customization. We aimed to show both audiences that we were interested in advance in this end of the business.

How successful was the SEMA experience for Audi? Do you plan to return this year?

It was our first appearance as an exhibitor and we got tremendous feedback from the media, the public and aftermarket companies. We’re examining what story we might tell in this year at SEMA.

To what extent, if any, has Audi made available its accessories to the independent aftermarket?

AoA sells accessories only through our dealer network.

Do you plan to make any/additional products available to the aftermarket?

We do not plan to sell directly to the aftermarket.

To what do you attribute your rise in accessory sales?

The primary driver for the rise in accessory sales was the implementation of a port-installed program. In addition, we have continued to improve and multiply our accessory marketing and communication efforts and add to our portfolio.

For more information, visit www.audiusa.com.

To what do you attribute the success of your diesel in the U.S.? What steps did you take to overcome consumer resistance to this type of fuel?

We saw that merely offering clean diesel as just another engine choice wasn’t going to overcome misperceptions in the mind of most Americans – misperceptions based on the poor performance of diesel technology a generation or more ago. So when we launched our first diesel models in 2009 we launched an aggressive education campaign that put a spotlight on the fuel economy benefits. We highlighted a U.S. government estimate that Americans could save 1.5 million barrels of oil a day if one-third of the vehicles on the road were clean diesel models. So it became a powerful energy independence message. We bolstered that by noting the substantial greenhouse gas savings diesel tech offers.

When we started we felt we’d be fortunate if TDI clean diesel models made up 18-20 percent of the sales mix for the models offering that engine choice. Last month, the A3 TDI model constituted 66 percent of all A3 sales.

Do you anticipate introducing additional diesel models to the U.S.?

We plan to at least double our TDI offerings by the 2013 model year.

How would you rate the results of Audi’s much-publicized 1,000-mile “green tour” of California? How would you rate clean diesel’s future as a viable fuel choice in the U.S.?

We completed the demonstration drive without any noticeable differences in performance. We used RenDiesel, produced by LA-based Rentech, Inc., and it achieved fuel economy nearly as good as traditional diesel. This was the biggest surprise as we expected a modest drop in fuel economy because the synthetic fuel is less energy dense.

Audi AG is very interested in developments with this type of fuel technology. It remains to be seen how it works in cars over hundreds of thousands of miles of driving. Rentech recently tested one of the cars from the California tour in a drive stretching from its Colorado refining facility to the Washington, D.C. auto show. No problems reported!

Audi believes the potential is there to develop a renewable fuel that can be produced from America’s vast natural gas reserves or even biomass, such as lawn waste. What’s more, the emissions profile of fuels like this promise to be substantially cleaner than any other choice – in some cases it can be cleaner than an electric vehicle.

Could you describe some of your social media marketing initiatives, particularly the sales campaigns that went especially well?

Our most notable social media campaign was the Facebook petition drive aimed at convincing Audi AG to bring the TT RS sports car to the U.S. market. More than 11,500 people signed up, including a number of people eager to put a deposit down immediately. This truly helped tip the decision to sell the car here later this year.

We have a full menu of social media surrounding our Super Bowl activities. (See details here: http://www.audiusanews.com/pressrelease/2213/93/audi-announces-social-media-plans-super-bowl-xlv)

PAGE 3

How did you manage to reach your targeted demographics within the social media realm?

That’s a matter of continuing focus. As you might guess, the demographics of heavy social media users skews younger than the typical U.S. luxury car buyer. There’s still benefit in standing as the aspirational luxury car for this younger audience. But we’re also working on ideas to form stronger online communities within our vehicle ownership groupings.

How did your social media activities compare with promotional efforts in the traditional media?

We invested aggressively in digital media – both in terms of online advertising and social media activities. We don’t reveal our budgets, though.

Could you describe your global Audi Terminal design philosophy for new dealerships? Are you currently seeking new dealerships?

The most visible sign of the comprehensive quality of sales campaign is the Audi terminal. Its visionary architecture, with a multilevel design that can be flexibly adapted to the given conditions, was designed for downtown locations. With its help, Audi is moving from the periphery into the city – and thereby follows its customers. Instead of a singular showpiece building at corporate headquarters, it brings sophisticated architecture to hundreds of dealerships worldwide.

“For us, it is about bringing the brand to our customers, with trendsetting dealerships that put people into the focus,” said Peter Schwarzenbauer, Audi AG board member in charge of sales and marketing. Audi AG is accompanying the movement of the terminals into the cities with greater emphasis on advertising in metropolitan areas. Added Schwarzenbauer: “We will communicate even more clearly what makes Audi the most progressive premium car brand in the world.”

To what extent were your existing dealerships remodeled? Does a refurbishing fit into the global Audi Terminal design philosophy?

Between 2008 and 2010, Audi dealers in the U.S. have invested nearly $171 million in their facilities, not including land prices and employee costs. We now have 276 dealerships, 145 exclusive. At the end of 2010, 224 of our dealerships provide our customers with an exclusive or brand-dedicated experience. At the end of 2010, more than 79 percent of our unit sales will take place at an exclusive dealership.

What are some of the features of your new or remodeled dealerships that have contributed to attracting customers to Audi?

It’s a clean, consistent look that reflects the brand image whether you are in New York, Tokyo, Munich or Kansas City. It’s a modern architecture theme that also ties in some elements of our 24 Hours of Le Mans heritage with a unifying angled wall.

You were at the Specialty Equipment Market Association (SEMA) Show for the first time in 2010. What was your target audience? Was it geared more toward consumers or aftermarket professionals?

We wanted to show Audi enthusiasts and potential customers that there are a range of choices to add individual flair to their cars – from factory installed options to dealer equipment to third-party customization. We aimed to show both audiences that we were interested in advance in this end of the business.

How successful was the SEMA experience for Audi? Do you plan to return this year?

It was our first appearance as an exhibitor and we got tremendous feedback from the media, the public and aftermarket companies. We’re examining what story we might tell in this year at SEMA.

To what extent, if any, has Audi made available its accessories to the independent aftermarket?

AoA sells accessories only through our dealer network.

Do you plan to make any/additional products available to the aftermarket?

We do not plan to sell directly to the aftermarket.

To what do you attribute your rise in accessory sales?

The primary driver for the rise in accessory sales was the implementation of a port-installed program. In addition, we have continued to improve and multiply our accessory marketing and communication efforts and add to our portfolio.

For more information, visit www.audiusa.com.