Audi U.S. President on the Future and Sustainable Technology - COMPLETE VIDEO and TEXT
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SONOMA, CA - September 5, 2009: Last week Audi held an extensive media event in California's Wine Country to showcase three of their 2010 models: the S4 Sedan, the S5 Cabriolet and the latest 10-cylinder R8 Supercar. On the second evening, Johan de Nysschen, the head of Audi of America made a formal presentation to the group of journalists. The following are Johan's complete remarks.
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Complete Text of Presentation
Thank you very much.
I’ve enjoyed our conversation, and I wanted to take advantage of this influential and captive audience – and you really are captive, the doors are locked – to share a couple of thoughts about where Audi is going in the future, the questions that guide our thinking and, I believe, our industry.
You know, automotive companies need to think in terms of the far end of the horizon. It’s not about just the next quarter or next year. We’ve got to think eight, ten, fifteen years ahead, so we’ve got a several-year window of concept to customer.
Now, as you know, this is Audi’s hundredth year. We are not the first car company to reach this milestone, but we are the first to reach it with such momentum.
Despite the trials and tribulations of the current economic environment, we go into our centennial with record sales in the US and, in fact, worldwide. Our thirteenth successive global sales record and profitability record.
We have announced and continued our commitment to a multibillion dollar investment to nearly double our product line, and to improve the ownership experience through a top tier dealer network. So, a very significant investment going into upgrading our dealer body as well.
Here in the United States, we go into this difficult year enjoying the highest level of brand awareness, brand esteem, prestige, consideration – whatever criteria you care to mention.
In a contracting market, we are gaining market share. This year, Audi has been the biggest winner amongst all the luxury brands. Which means that in an expanding market – and you know that normal times will come back – we will be able to capitalize on this momentum and actually also gain volume.
But Audi is a high-end car maker. It means, by definition, we focus on “exclusive,” and so for us it’s not just about volume. Our real progress is in the improvement in the quality of our business. Thanks to the significantly enriched sales mix, our revenues this year tracked against last year are, in fact, virtually even. There are not many car companies that can say this.
Our margins remain sound, our discounts remain under control, and our incentive spend is one percent higher than the same time last year. There’s not another car company that can say that in this cutthroat environment that we’re in. And so, unlike many of our competitors, we really are earning our market share growth – we’re not buying it.
But, I guess, with beautiful and dynamic cars such as the ones you’ve experienced today, we’re also increasing our share of something else… and that is our share of the conversation.
We have made investments in the pursuit, however, of one single goal. We intend, in our second century, to lead the world… as the world’s premier luxury automotive brand. Now, we’ve set that goal very, very publicly. And we’ve set ourselves the goal of being the number one premium brand within the next product cycle. The product cycle is six to eight years. It’s a very tough, bold and ambitious challenge.
But to us, number one isn’t just the sales scoreboard. Sales are the result of perfection and excellence. It’s the result of the process. For us, number one means creating a car that is as close to perfection as is humanly possible. You’ve heard some of the principles that go into creating an Audi; the things we are so passionate about. These are the vehicles the world’s best engineers and designers want to create, because it is what we live for. It’s what we do. It’s what our pride comes from. These are vehicles that people of distinction want to drive.
But, ultimately, our ability to achieve all of this is being dictated by two fundamental questions:
The first question is: what will the luxury automotive market look like?
Second, and perhaps even more fundamentally, is driving itself a luxury which is sustainable or are we to migrate to the world of mass transit systems – buses, trains and whatever else may happen?
These are significant questions, and the second one, I’m sure, is not one that you often hear auto executives ask. But we have to think of these things, because it goes to the essence of the sustainability of our corporation. Again, as we are thinking of a leadership position in terms of centuries, and so we must ask these questions and we have to find the answers.
And, as Audi enters our second century, we are answering both of these questions simultaneously. We’re defining the future of luxury by defining the future itself to be more sustainable, to be more beautiful, and more progressive than ever before.
I’d like to begin with the first question of luxury.
Luxury as it was once known – “legacy luxury” – was unconcerned with cost in every sense of the word. It was about conspicuous consumption from the price tag to the resources consumed. You needed a big, flashy car.
When you look at the vehicles that defined luxury for the last several decades, you see size for the sake of size. You see symbols for the sake of status. You saw the emergence of aggressiveness being portrayed as sportiness, but which was actually bordering on arrogance… offensive to many. The “relentless pursuit of perfection” that somehow forgot about the passion that goes along with creating and crafting fine automobiles. How boring.
These are all remnants of an automotive landscape that, we believe, is fast receding into the rearview mirror. “Progressive Luxury” is what we see when we look forward through the windshield.
There will, of course, always be people of enduring achievement who will be well rewarded for their work. Society needs them. These are the people who lead the advancement of society, and these successful people will seek to reward themselves with cars from companies of enduring achievement. People associate with that. But those purchases also need to square with the ethos of an era that has been called “the end of excess.”
Twice in the last two decades, Americans, for example, have seen bubbles that inflated and burst on industries that feel in retrospect to have been illusory –there was the dot.com bubble, for example, and then there was the real estate bubble. And when these things collapse and you find that what you thought was real and tangible was not really so, consumers begin to look for something real, something tangible, something solid – what analysts have dubbed “the flight to quality.”
And quality is what we believe we at Audi are delivering, through rigorous development, testing and meticulous attention to detail. We’ve discussed some of that here with the panel already this evening.
The Audi driving experience is not just about getting from point A to point B. Let me be quite frank. There are many other automobiles – quite fine automobiles – that will get you quite satisfactorily from A to B. But, it’s not just about conveyance and about transportation. For us at Audi, it’s about enthusiasm and exhilaration in an environment of security and comfort.
It comes from the solid feel when you close that door with a beautiful, solid thunk… the nearly musical growl of the powerful exhaust note… the craftsmanship of the leather, wood, and aluminum – everything feels authentic in an Audi, because everything is authentic.
During testing, we make sure that every single component works exactly as it’s designed to, in every imaginable environment, over the course of hundreds of thousands of miles. But as we also alluded to in our discussion earlier, it’s not just a normal development and testing process. As often as not, we use the most demanding test drivers we can find – Audi executives. The people who lead this company. The people who put their own personal pride at stake and see their signature in every automobile that bears the four rings.
We also make sure that everything works as you and the consumers want it to work.
That’s why we’ve pioneered innovations such as drive select – which allows you to choose the handling, powertrain, suspension, and steering settings for your style of driving. We have superlative engineers. We have very smart finance guys. Our company also has smart marketing people. We in the room, as automobile enthusiasts, like cars that are somehow dynamic, sporty to drive, with good steering feel and a meaty weight to the steering wheel.
But you know, there are plenty of other customers who prefer a light steering sensation. For them, that is what they require from the car. We have two choices. We can say, “That’s not us, go away.” But because we are pragmatic people, we also want to offer a product that meets their expectations. Drive select means no compromise. You can have it all. Select how you want to configure your car.
No driver wants to spend their first hours in a car figuring out how to work the radio or how to adjust the air conditioning or even put it into drive. A recent reviewer of an Audi described the brand as the “Apple of luxury cars” – “with sleek designs that are modern and minimalist, consistent and familiar.” I think that is a very, very good comparison – and it must be no coincidence Steve Jobs drives an Audi. That is a comparison, therefore, and a description that we are very happy to accept.
I will tell you that we also devote a lot of time and attention to the things you may not have noticed.
For example, we are here in a region where we put the most sensitive noses to work in evaluating different wines.
At Audi, as we alluded to earlier also, we put people with sensitive noses to work in evaluating leather and the materials that we use in our cars. We believe that an Audi has got a particular signature in terms of the smell of the cabin. And we must make sure that no material comes into that interior that will disturb that equilibrium. We’ve assembled a team of our most olfactory gifted employees to analyze all of the components that go into constructing the cabin of our vehicles. They’re not allowed to smoke, or wear perfume or aftershave… and they work to ensure that the overall smell of the car is just right. What other car company does this?
We bring a similar dedication to every aspect of the driving experience, from the force required to close the doors – there is a particular amount of thrust that we think is fine to close the door. And it fascinates me… I’m often driven around by drivers who hop out very enthusiastically, open the door for me to get in, and then slam it shut so my ears ring. I will immediately get out and show the guy – “Sir, this is a finely crafted, precision automobile. This is how you close the door of an Audi…” Thunk.
That’s what we do. You don’t need to slam the door because we design the cars that way.
It goes to the haptics of every knob and control. Try it the next time you’re in an Audi. Perhaps you’ve not noticed it. Every single control and button in the car – whether it’s the radio button, the vent button, the sunroof operating button, the window button – they all feel exactly the same, the resistance is the same, the sound is the same, the way to operate it is identical… attention to detail.
I recently drove a car a few weeks ago – a very fine car of a competitor – at a new product launch. I came away very impressed with the car, but there was a good example for me of different system suppliers of different controls in the car and every one had its different feel. It’s different.
That’s what makes an Audi special. It’s a combination of all these things that makes the car feel flawless inside and out. Attention to detail. You realize when you get into an Audi, it’s not just the engine that moves you. It’s the whole package. It’s about the emotion of the driving experience.
So, yes, we do spend a lot of time ensuring that our owners drive something better. It’s not just transportation from A to B. We and our consumers also want to drive at, however, something better – a more sustainable future.
Part of the notion of Progressive Luxury is that true luxury leaders should also drive progress.
Now, beyond elegant design, powerful engines, flawless finishes, and sweet-smelling leather, Audi innovation is about a healthier environment, a reduced dependence on petroleum products, and a cleaner and greener tomorrow. Not just for the people who are driving our cars, but, honestly, for the greater benefit of society… the majority of people who probably will never drive an Audi.
The truly sustainable solution is to give today’s consumer a much more efficient version of what they already want – whether that’s performance, space, fine finishes… or all of the above. Consumers are not willing to compromise. They’ve told us what they want and we must rise to the challenge.
Now, it may seem a little bit counterintuitive that I’m standing here talking about sustainability on a day when we are showcasing a whole family of performance cars. But consider that two of the cars you drove today already went from a v8 to a supercharged v6, demonstrating that even at the high end, you don’t need to sacrifice performance for fuel economy.
However, it’s also very clear that in pursuing sustainability, there is no silver bullet. If you’ll pardon the pun, there’s no “Volt” from the blue. But there are several exciting areas where we are innovating… and on the subject of the Volt, that is something that we can discuss over dinner. I mean, there’s a whole lot of stuff to be said about that concept…
Now, many of these are efforts to make the vehicles more efficient. Some of the investments also need to be made to make the driver more efficient.
Let me start with the vehicle first.
We certainly believe that lighter materials are a big part of a sustainable future. That is why we’ve pioneered the aluminum space frame that we’ve heard so much about, which now serves as the skeleton for our A8, R8, and TT models, and other ones in the pipeline. It weighs half as much as the steel necessary to do the same job, and performs with 50% greater rigidity.
That’s important because for every 100 pounds lighter we can make a car, fuel economy increases by 2 percent. In the future, you can expect even greater strides in this area from Audi, as we’ll discuss in a moment.
You can take FSI direct injection. By injecting fuel directly into the combustion chambers, we reduce heat loss, we reduce exhaust emissions, we reduce fuel consumption by as much as 15%... all at the same time we’re improving performance. More power out of the car.
Take our turbocharged diesel engine with direct injection – TDI, which Audi pioneered.
Now, many of you will have heard me proselytize for diesel before. I am the world’s biggest diesel advocate. I wouldn’t be so adamant about it if I wasn’t absolutely convinced that diesel is not only a clean and viable fuel alternative for America, it is, in fact, the preferred one.
When it comes to the best fuel alternatives for America… and for the best driving experience possible… certainly, diesel is no longer a dirty word.
We say that Americans buy horsepower, but they really drive torque. They want that shove in the back. Diesel delivers incredible torque characteristics while requiring 30-35% less fuel than an equivalently powered gasoline engine.
Multiply that efficiency across a larger population and the impact is quite significant. Some of you might have heard me say before that if one-third of US cars, pickups, and SUVs were diesel-powered, America would save 1.4 million barrels of oil a day. That figure comes from the EPA, it was not invented by me. That’s how much oil we import daily from Saudi Arabia. If you think that percentage of cars in a far-fetched number, remember… in Europe today, just about one out of every two cars is powered by diesel.
Our diesel engines that we now sell in the US already comply with the most demanding emissions laws in the world, which happen to be right here in California.
However, as American policymakers look towards the renewable fuels of the future, diesel truly again presents itself as a strategically sound alternative. Two presidents in a row have now talked about the potential for fuel derived from biomass because it doesn’t compete with food production like ethanol… which, in itself, is yet another chapter and a fiasco that we can talk about on some other day.
We know that biomass-to-liquid diesel can work – that’s the fuel, for example, that we used to win Le Mans last year.
In addition to the sustainable, renewable energy we can get from biomass-to-liquid, there’s also the reality that America has staggering reserves of natural gas. Through sun fuel, we can convert this also to diesel fuel using the existing technology, existing drivetrains, existing distribution systems… we don’t have to invest billions and billions and billions to create new forms of propulsion. All with beautifully clean exhaust.
Diesel may not be an overnight sensation, but if we want it to be a long term solution, we have to put it in front of the consumer, and that’s exactly what we at Audi are doing.
Now, the efficiency of a diesel engine is dramatic, but it’s just the beginning. We’re at work making every single element of the vehicle more efficient – including the driver.
For example, we are in partnership here with several California Universities. We have a team working on the concept of environmentally friendly navigation. Yeah, you heard right. A navigation system that’s designed to calculate the most environmentally friendly route to a destination. The one that will produce the lowest amount of CO2 emissions.
Another team is working on smart engines. Gasoline consumption can be reduced by up to a third while a vehicle receives information about its future environment – what it can expect in terms of acceleration – Is there a hill coming? Does it require braking? – even the external temperature.
We’re working on vibration energy harvesting. What is that? Vehicles today have sensors all over the car which are capable of sending information via wireless technologies. But that doesn’t help so much because these sensors need to be powered, so they still need to be connected by cables throughout the car. Now, vibration energy harvesting seeks to use the natural vibrations of the car while it’s in use to power these sensors, so you can remove the cables, reducing weight which increases fuel efficiency.
We have a team looking at ways to incentivize and influence driver behavior. Driver behavior affects as much as 30% of fuel consumption. Do most drivers know the optimal moment to shift gears, or to avoid jackrabbit starts, or even the best speed for cruising under particular conditions? No, they don’t. But if the car told them, the savings could be quite huge.
One hundred years from now, as we’re celebrating our bicentennial, we don’t want to look back and say that we were the company building the best cars when the last car was built. We want to be able to say that we were the company that not only built the finest vehicles, but made driving a lasting, sustainable, act. To us, that is the definition of Progressive Luxury. That is what will allow us to establish ourselves as the world’s leading luxury automotive brand. Still, we know that dethroning the reigning luxury leaders will not be easy.
One auto analyst recently observed that “Brand loyalty is a very difficult hurdle to overcome, especially when it comes to luxury brands… So Audi is going to be fighting an uphill battle.”
We’ve fought that battle and won that battle in Europe. The battleground is now in North America. Luckily, heading uphill has never really bothered us.
I’d like to thank you now, and invite you out to dinner.
Thank you very much.