Strong US Demand Allows Audi To Overtake BMW In April Global Sales

It's important to note that profit is far more important than unit sales. Sustained profitability is more important than quarterly profit. Sincere kudos to Audi for becoming "No.1" (in unit sales), but if I were a betting man, I'd put my bets on BMW.

My understanding of BMW is that they're constantly trying to anticipate future trends, and putting their bets on their best guess. By doing this, they might get a jump on the competition if they get it right. BMW was one of the earlier entries into the luxury SUV market (Rover was arguably the first), and when luxury SUVs became all the rage, BMW was well entrenched while many of the other guys scurried to catch up.

I recently read an Audi press release that predicts 40-45% of all Audi's sold by 2020 will be SUVs. Maybe. If today's SUV popularity continues to grow as it has in the past, and that is projected forward, then maybe. That's where Audi is placing their bets. If they're wrong, then they will have invested tremendous resources in vehicles that aren't selling well, and insufficient resources in the vehicles that people actually want (in the future), but which might not be compelling enough due to insufficient development.

Today, Audi's Q5 is wildly popular. The completely new, totally restyled, recently introduced Q7 is proving to be much less popular than its predecessor, not to mention today's Q5. Starting next year, the wildly popular current Q5 is being replaced with a completely new, totally restyled Q5 that bears a strong resemblance to today's less popular Q7. Audi's luxury SUV winning streak might be cut short by something as simple as a less popular styling language, or new interiors that don't appeal to those who have been *historically* bowing to Audi's best-in-class interiors. It can change that quickly.

The bottom line of what I'm saying, is that being No.1 in unit sales is meaningless, except for bragging rights. The vehicles you deliver, their desirability, and your profitability, are the ultimate success factors that'll keep you healthily in the black, or not. BMW is a good example of a company that's able to do that, year after year. They don't sweat, even during an economic downturn or recession. That's saying something for the power of sustained profitability, and a winning management team.


(DISCLOSURE: Steve has owned 4 BMWs over the past 18 years, and loved them all. He's down to 2 at the moment, and he's in the process of letting them go as he awaits the arrival of his first Audi. This disclosure highlights that he is neither a loyal BMW fan-boy, nor an Audi-basher.)

Disagree. Many trailing companies will forego a level of profitability in the short term to drive volume up, knowing this will drive demand and production scale. Once scale is met, the profitability margin can grow with a larger dedicated base of customers.

jeffgall: My understanding is that attaining volume while sacrificing short-term profitability works in *some* cases, like computer software. Get someone to buy your software cheap (competitive discount) or get it free (trialware), and then hopefully they get "hooked" on it, and they'll likely buy the upgrade, or better still, you can drop support for unit sales and sell only annual subscriptions. Yes, this often works in software. Examples include Adobe Photoshop (who now only sell an annual subscription to the people who depend on it), and TurboTax (who sells you an annual upgrade for the tax software you need once a year).

As far as I know, this strategy is questionable at best in the auto industry, or very unlikely to work. The reason is because today, people are keeping their vehicles longer (average is now about a decade), so while you sacrifice profits today, you're hoping for a pay-off in the form of repeat business a decade from now? Good luck with that.

The other thought is that because you're the "best-selling X in America", this will inspire other people to buy your product. Maybe. Maybe not. We see giants who owned the market disappear, like Palm Computing and Blackberry. The Big Three sell far more cars than BMW would ever dream of, and yet we've seen repeat bankruptcies there. So much for volume over profit.

The strategy you propose appears not to be guaranteed, and not to work in some sectors. Even in the auto sector we see Mercedes, BMW, Audi, and Lexus frequently trading placed as No.1. There appears not to be any runaway success from owning that No.1 spot. That means even though a luxury car maker makes No.1, they've never been able to hang onto it for long, nor have they been assured of eventually becoming more profitable.

And then there's BMW, arguably the most admired car company in the world. For decades, they've been consistently profitable (well, except for that one year when they paid to unload Rover), and they seem to be so strongly so, that they're recession-proof. BMW is a great example of how volume means diddly. Consistent and sustainable profitability, on the other hand, is golden. It keeps you alive and thriving, while others are hoping to be healthily profitable in the long run by selling lots of units and being less profitable now.

I think Audi knows volume is only beneficial if it comes with profitability. As for who thinks their approach will work and will not work, well, everybody has an opinion.

I agree with you Steve, thats why MB and BMW are more profitable so far..but for how long?...

Yonder7: I don't have the answer. It's interesting to note, however, that Audi has the advantage being part of the Volkswagen group, which includes VW, Audi, Porsche, Lamborghini, and Bentley. With that sort of association, they should be able to leverage a lot of cross-pollination and therefore lots of cost-savings. By all rights, they *SHOULD* be the most profitable, all other things being equal.

But as we know, all other factors are not equal. Time will tell.

Who cares. This is like p#ssing contest with these 3 regarding this info. Let's be honest: Does who sells more cars, really change WHICH car you will buy or put in your driveway next.

It doesn't for me because I've owned them all. I buy the car that has the design features, performance options, interior or exterior craftsmanship that suit my taste....not who sells one more bag of peanuts more than the other guy.

gkearns56: +1
Like you, I've never considered unit sales when buying any of the vehicles I've ever purchased.

Audi actually has a HIGHER profit margin than BMW (this has been the case for a very long time) and is less than 10,000 units behind BMW globally!

Audi is clearly aware that profit is more important than number of vehicles sold and is using the excess cash it has thanks to its higher profit margin to overthrow BMW for the top sales spot globally.

It's a virtuous cycle. Audi has had a higher profit margin than BMW for a long time and we are now seeing the results of what happens when Audi uses that extra cash to invest in new models, research and developments and technological innovations like automated driving, LED lighting technology, etc.

Being part of the Volkswagen Auto Group allows Audi to create vehicles much faster and at a much lower cost than BMW.

All I know is all these sales are hurting service. There's one dealer in city and as a result their earliest appointment is almost 60 days out. I ended up going to a nearby city that has 3 dealers and appointment within a couple days.

judging what people have to pay to get into an audi lease im sure their profits are great. as long as 60k bmw's go for 650 per month and 60k audis go for 850, you know audi is making money.
i think all 3 german brands are great and push the others to better themselves.
i happen to be one of the guys that refuses to get ripped off because i like audi's, ill wait till their lease deals can compete with bmw and benz before i get one.