Audi is taking the fight to BMW and Mercedes with a new strategy

Audi had a banner year last year.

The German automaker sold more than 200,000 cars in the US for the first time in its history — reaching this milestone three years ahead of schedule.

Audi’s surging sales were led by the strong performance of its A3 compact sedan as well as the Q3 and Q5 crossover SUVs.

Leading the charge for the company is Audi of America president Scott Keogh.

The 46 year-old from Long Island, New York has been Audi’s top man in the US for more than three years in which time the company has experienced record growth.

Keogh sat down with Business Insider at the 2016 Consumer Electronics Show in las Vegas. We talked about everything from the prospect for a slowdown in US sales, to plans to launch an electric SUV, and parent company Volkswagen’s emissions scandal.

On the US auto market in 2016:

The auto industry in the US, as a whole, had a banner year in 2015, with 17.5 million automobiles rolling out of dealer showrooms — a feat that had never been accomplished before.

“Looking at the macro view of the American car market, I think it’s still good,” Keogh said. “Fuel prices and interest rates, while climbing, are still extremely low and if you look at the age of most fleets out there you are still looking at a 10 to 11 year old vehicle population so there will room for movement there.”

However, the Audi executive a cautioned that the strong performance of the industry in 2015 will likely seen growth rates slow down.

“I think we should not be naive, though,” Keogh said. “The market just broke a record for sales and I don’t think we are going to see the type of growth rates we’ve been seeing.”

“Since the market hit rock bottom in 2008-2009, we’ve seen these great growth rates,” he added. “There’s no way that’s going to continue when the market is already at 17.5 million cars.”

Audi A4 2.0 TFSI quattro 4AudiAudi A4.

As a result, Keogh believes there will be a tighter market in the coming year and will force car companies to step up their game in terms of product, service and strategy.

On what car companies need to do to succeed in a tighter market:

“Tighter markets mean they will have to have good discipline,” Keogh said.”Take care of customers, generate good demand from marketing, hopefully have fresh products to drive people into dealerships, don’t get over supplied with inventory, and hang on to your pricing power.”

“These are crucial fundamentals which you will have to hang on to, and Audi will certainly do that,” he added.

On Audi’s electric vehicle charging infrastructure:

In 2018, Audi will launch a long-range electric SUV based on the company’s much-hyped E-Tron Quattro Concept. Although the new SUV is expected to a range of 270 to 300 miles on a single charge, Audi will have to satisfy the needs of its customers for fast charging both at home and remotely.

According to Keogh, effective fast charging at home will take care of the needs of most customers due to the fact that 300 miles of electric range will be for than sufficient to hand most daily driving needs.

However, Keogh does believe the availability of remote charging locations is very important.

Audi E tron quattroNewspressAudi E-Tron Quattro Concept.

“The biggest thing for me for those who purchase our EVs is peace of mind,” Keogh said. “When someone is looking at a gasoline powered car, they have no concerns at all [about finding a place to fill up] and we have to overcome those concerns with EVs.”

On that end, Audi is working with Bosch to install in-home charging system along with a network of supercharging stations.

On concerns of about cuts to Audi’s R&D budget after VW’s emissions scandal:

With Audi’s parent company VW Group cutting back on spending due to the massive emissions scandal, there have been concerns about how this will effect the research and development of the company’s next generation of cars. Although Audi has become more cautious in its spending for 2016 and has delayed the construction of a new wind tunnel, Keogh does not believe there is cause of concern.

“If you look at the big picture, the majority of the money needed for the new products have already been [invested on them] and [the new cars] are coming,” Keogh said.

Furthermore, Keogh doesn’t believe Audi will feel much of a financial pinch when it comes to R&D.

Audi R8AudiAudi R8 V10

“Audi is a very profitable and very successful company and any good business person knows you put good money into good and keep investing in what’s successful,” he added. “And I feel confident that’s what Audi AG will do.”

On the role Quattro and Audi Sport will play in Audi’s strategy:

Recently, VW Group announced that long-time Lamborghini CEO Stephan Winkelmann will leave Lambo to lead Audi Sport’s Quattro performance division. Although Keogh couldn’t say if Winkelmann’s move has any direct correlation with the company’s plans for the brand, he did indicate Quattro and Audi Sport will play a much bigger role in the company’s product portfolio.

“You going to see a lot more high performance ‘RS’ models from Audi Sport in the US,” Keogh said. “We think this is a brand we haven’t taken enough advantage of.”

“Although we’ve done well with the RS cars, now we want to do better,” he said. “We are working this dealerships to do this and also offer a more aggressive product portfolio.”

Currently, the only Audi Sport models offered in the US are the R8 supercar and the RS 7 four-door coupe. Keogh expects those models to be joined by other high performance variants such as the TTRS and more than likely the RS3 compact.

Keogh also working to get the much-sought-after RS6 Avant wagon to the US market in the future.

On the role “RS” will play in competition with BMW Motorsports and Mercedes-AMG:

When asked whether an expanded portfolio of high performance RS models will give Audi a full-fledged counterpart to BMW’s M car and Mercedes’ AMG, Keogh answer with a firm “yes”.

Audi RS 7 2016AudiAudi RS7.

Furthermore, he added, that Audi has taken a different approach to its high performance brand than their German counterparts in that the company has spent much more time delivering racing success and not enough time capitalising on the commercial aspects of the racing image.

“We spent so much on the authenticity of Audi Sports and the racing of Audi Sport that we forgot to commercialize Audi Sport and take advantage of the success we’ve had,” Keogh said. “Our competitors have done a smart job of putting more focus into turning out more M cars and AMGs.”

With that said, Audi’s racing success which include more than a dozen victories since 2000 at the gruelling 24 Hours of Le Mans endurance sports cars race will mean the company won’t be lacking for credibility.

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