Fleet News

Buoyant Audi looks for stability in fleet

Audi makes cars that fleet drivers want - it won two Fleet News awards this year for its A4 and A3 cars. But 2010 is shaping up to be a challenging year and Audi’s head of fleet sales Iain Carmichael says he will be happy if sales remain static.

At a time when many manufacturers are looking to grow fleet sales to help compensate for the expected drop in retail sales, Audi is taking a different view.

“My target this year is to deliver a similar level of volume as 2009,” says Carmichael. That equates to 6.8% of the fleet market or some 60,000 cars.

Despite his cautious approach, inline with the rest of the automotive industry, Audi fleet sales got off to a flying start to the year.

“It has been particularly strong in the corporate channel, which is the core of what we do,” says Carmichael. “Customers want to drive Audis and the majority want to fund Audis and the majority will do that through the FN50 contract hire and leasing industry.”

Audi’s strength is in its desirability among user chooser fleet drivers. “The driver for us is the critical person. We don’t sell in bulk – the majority of our cars go to user choosers who are speccing up their Audi and ordering it through their contract hire company.”

This strength in the user-chooser market makes Carmichael’s plan not to grow sales in rental and Motability believable.

Audi is one of those marques that competitors’ fleet sales directors at the volume manufacturers must envy.

It makes aspirational cars which puts it at an advantage over volume carmakers who may chase volume by pushing cars into the short-term rental and Motability rather than dictate sales into these sectors.

Audi puts just 3% of its total volume - or 3,000 cars a year - into rental fleets, almost all on buy back thus guaranteeing its dealers a supply of quality used cars – typically seven months old with between 12,000 and 14,000 miles on the clock.

“That 3% is the highest level I will go to,” says Carmichael.

Motability, which often requires significant manufacturer support, gets just a handful – between 200 and 500 – Audi cars a year. “Motability requires a factor of support,” says Carmichael. “And that’s not what we are about.”

There is one area of fleet sales that Audi could arguably be seen to be over represented in – that of internal registered cars.

It puts 10,000 cars – 10% of total sales volume – into internal and demonstration fleet. This is a level Carmichael is happy with. He says strong residual values, which have benefited the entire industry, make internal registrations viable.

“This year what is a key factor is the return of residual values, making the registration of cars internally, whether that’s by the manufacturer or dealers, much more possible,” he says.

“Our demo fleet is now back to where we want it to be, the same is true of our dealer demonstrators. These are all prime used cars for our dealer network.”

Small businesses
 
There is one area that Audi is planning to grow sales. It wants to sell more cars to local small businesses.
 
“We don’t sell as well as we could in this market,” says Carmichael, despite having 96 showroom-based local business development managers (LBDM).
 
This year they should sell 9,000 cars, up from 8,200 last year, and that 10% growth pattern should be sustained.
 
 “There is a void here,” says Carmichael, referring to the decline in brokers who traditionally handled this business.
 
“We see the LBDMs as the Audi brokers but not multi-brand. And this is where we see growth opportunity.”
 
The battle for aftersales business
 
But it is the user-choosers – the drivers of Audi cars – that are the focus of Carmichael’s attention.
 
“The driver of the car is the chooser and that’s key. The person we need to influence most is that driver.”
 
However, focussing on the driver and keeping him happy presents some challenges when it is not the driver who pays the bills. Independent service centres are challenging the traditional model of having cars serviced at franchised dealers, and Carmichael must battle alongside his dealers to keep that work.
 
His response is to ensure the vast majority – 95% – of fleet servicing and repair work is also carried out by Audi dealers through its National Fleet Service Pricing programme, which guarantees service levels, lead-in times and prices across its dealer network.
 
Three-year agreements have already been signed with lease and contract hire companies that will see them direct 90% of their service work into Audi dealers in year one, rising to 95% by year three.
 
But dealers must now deliver on Audi’s promises. “We have to address the concerns of the contract hire and leasing industry over customer service levels – such as lead-in times, access to collection and delivery and more importantly about price,” explains Carmichael.
Where dealers fail to meet the SLAs (service level agreements), Audi will intervene.
 
But the programme goes further
 
“So they have all the benefits of dealer service and they have labour rate consistency,” says Carmichael.
 
“But we are also offering enhanced goodwill support up to 100,000 miles over three years. So this is not just a commercial agreement. We have gone beyond to address all of the key issues.”

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