Interview: Peter Schwarzenbauer (Continued)
AW: Thank you. Let's switch gears again. Talking about TDI in the US market I think we can agree that the approach has been very measured and cautious. How important is the success of diesel in the US in the long term to your sales prospects in the US?
PS: You know things are changing in the US right now. If we had this interview just five years ago we would have both said, "diesel...the Americans can't see it". But now that fuel economy is becoming more and more of a topic and if you look at the real possibilities of savings of a TDI engine versus hybrids you can see that these cars and this engine concept has a lot of potential. We believe that now is the right time to do it. Americans are more open to fuel efficent products, and we have a great offer. We are currently starting our mileage marathon across the US where we want to really prove to the American public that it is not just marketing talk, but it is reality. You can drive it yourself and test it. We have great comparisons to how efficient these cars really are.
AW: Could you put your finger on any market share expectation for diesel over 5-years? What number would really tickle you if you could get to that number in the US market?
PS: I think this comes back to...well [thinking].
AW: I think the market penetration of diesel in Europe is what, 80%?
PS: 60%...well 80% in certain markets and 60% overall in Europe.
AW: OK, thanks for the clarification. So again specific to the US if you could get to 10% in 5-years would that be fantastic?
PS: Look, this is difficult to predict because there is no historical information. Look at all the hype around hybrids in the US. If you look right now the total market penetration is only 2%.
AW: It's that low?
PS: Yes, that low. And that is a typical behaivor of a consumer. Everybody says, "well we need to be green, but let the neighbor do it" because the green technology costs money. Hybrids are more expensive than normal engines, just as TDIs are a bit more expensive than normal engines. There is still a process where people have to get used to it, be convinced it is the right thing to do and be willing to pay for it. To answer your question - if we could get to just 5% of our total market in the US in the next couple of years this would be huge compared to what we have been seeing.
AW: Right, when you put it into that context that really makes sense.
PS: Yes.
AW: Production in the US...is it inevitable - just a matter of time?
PS: Of course we are carefully looking at it. Our core competitors are producing in the US. Volkswagen Group has decided to go to the US. So we are looking into this. But it is still too early to say if we have to do it.
AW: I tried to phrase my question carefully so as not to ask "when" or "please confirm", but just is it inevitable over time?
PS: It is not inevitable. It is not an absolutely needed thing. It could help and that is what we are currently analyzing. How much would it help us? And that is what the main decision will be.
AW: The thing I've noticed lately is you take an German spec car and you look at the price in Euros and then you take that same car in the US and lately it has the same price in dollars as the car in Euros. The exchange rate is not 1:1, so it seems like it is very expensive in the current exchange environment not to build in the US.
PS: You just said the important words - "in the current environment". Building a production facility is not something you can base on the current environment. You have to see what will happen long term over the next 15-20 years. This is what we would base this decision on. If you are thinking only of today and we were all sure that this would continue for the next 20 years then it would be very easy.
Scott Keogh: It is also not a 1:1 relationship because you have very expensive components which are going to come from Germany anyway, and then you are going to have some 3rd party suppliers. Some of the product you are going to have to ship back. So really you have stuff going back and forth, so it is not as clean as just a 1:1 comparison.
PS: And then you have a 10% export tax when you export from the USA to Germany which you have to compensate for. So it is a complicated decision.
AW: So I know for a long time the US was one of the bigger or the biggest export market. I think the UK passed it last year along with China? How is that shaking out for this year and who's got the most momentum in the short term?
PS: China is definitely the market where "the heat is on". Currently our growth pattern is about 22% and we are going to hit round about 120,000 units in China this year.
AW: All produced in China as well?
PS: Part of it. We build the A6 and the A4 and the rest is imported. We have UK at a little bit above 100,000 and the US is now in third position.
AW: Ya, we have to get back ahead of them! It's a good competition.
PS: It really is. I am always telling our Chinese team that they have to overtake Germany. The Americas I ask to overtake China...etc.
AW: To finish up, what is a day in the life like for you at Audi? Walk us through your day.
PS: [Laughing] Right, do you have 24-hours for me to tell you???
AW: How much are you traveling and what is your routine?
PS: Let's say on average I am traveling two or three times per week. I work from about 7:30 in the morning to 9:00 pm - that's a normal day and then you have days where you start to read the papers after 9:00. Saturdays and Sundays you have events and then Monday starts again.
AW: Are you a motorsports enthusiast then?
PS: Yes, definitely. I have been to a lot of the ALMS races and went this year to Le Mans here. DTM is touring championship here in Germany.
AW: Right. Well it must be nice now for you at ALMS because you can root for both Porsche and Audi together?
PS: Oh no, only Audi!
AW: That wasn't a trick question, I mean they don't race in the same class…
PS: No, we are rooting only for Audi now.
AW: Well it is very good to meet you for the first time and get to know more about you. I hope our paths continue to cross.
PS: Definitely. Come and talk to me whenever you can. Thanks for your visit.
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