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Audi's ‘streak' shifts to a run of bad luck

At this point a year ago, Audi had just ticked off its 102nd consecutive month of year-over-year sales gains. Its products were in demand and available, and its experienced leadership team was scaring the hell out of its larger luxury competitors.

But clearly, something has come loose within Audi's well-oiled machine.

The German brand's sales have fallen in six of the last seven months — including a staggering 21 percent drop in April and a decline of 8.7 percent in the first four months of the year. Supplies of some of Audi's most popular models are restricted by emissions testing in Europe or otherwise unavailable. And on May 2, it unexpectedly parted ways with Mark Del Rosso, a longtime Volkswagen Group of America executive who had been Audi of America's president since December.

"It's not been a good six months," said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book. Audi, Brauer said, "is clearly not as healthy as it was at the end of its [sales] streak. You've got a downturn in the market since the start of the year, the loss of the Q3, perhaps the onset of the Tesla Model 3. All those factors may have contributed."

So what happened? From a sales standpoint, Audi's skid has almost everything to do with the lack of its Q3 compact crossover. A redesigned Q3, which debuted last year in Europe, won't reach the U.S. until late summer at the earliest.

Why? Inventory. An Audi of America spokesman confirmed that there had been no Q3 production for the U.S. in more than six months at the automaker's factory in Martorell, Spain. And as of Wednesday, May 8, only about a dozen new Q3s were left for sale in the U.S.

Through the first four months of 2019, Audi dealers had sold just 415 Q3s in the U.S., down 94 percent from the 6,892 sold during the same period a year earlier. To put it in perspective: in April, Audi's U.S. dealers sold just 17 Q3s compared with 30 R8 supercars. In 2016 and 2017, U.S. Q3 sales topped 20,000 each year.

"When was the last time I had a new Q3 on my lot? December," said Pat Primm, a partner at Cascade Auto Group in suburban Cleveland, which owns Audi Cuyahoga Falls. Primm said Q3 customers have been pretty understanding, and Audi has begun some programs to keep them loyal while they wait.

"For lease customers, we can extend their lease out, up to six months. And Audi is giving us extra incentives to encourage customers who can't wait to choose something else that we do have in our inventory."

Primm said potential customers call weekly about Q3 availability. "The thing about Audi clients, they're very forward thinking. They usually want to wait for the new car. So they're waiting," Primm said. "But there are people that want that particular vehicle, and if we can't satisfy them, then they'll transition to something else."

But the Q3 is not Audi's only problem. The brand is struggling to comply with Europe's Worldwide Harmonized Light Vehicle Test Procedure, which was implemented last year and has led to tighter availability of A6 midsize sedans with the 2.0-liter turbocharged inline-four engine. Q7 large crossovers with the 2.0-liter turbocharged inline-four just began arriving in the U.S. in February, an Audi of America spokesman said.

At the brand's annual press conference in March in Germany, Audi CEO Bram Schot blamed the brand's response to the new testing procedure for a 3.5 percent decline in global deliveries in 2018, and said Audi would take steps — including possibly limiting engine choices — to solve the problem.

Less than a day after disclosing April's disappointing sales, Audi abruptly announced a change of leadership. The brand said Del Rosso, 55, had left the company, effective immediately, to be replaced on an interim basis by COO Cian O'Brien.

In 2017, O'Brien had replaced Del Rosso as Audi of America COO when Del Rosso was named president of Bentley of America. In December, Del Rosso left Bentley to head Audi of America.

Audi's announcement of Del Rosso's departure cited no reasons and provided no details. But it did say that O'Brien would retain his COO role "while the company works to identify Audi's next president."

In January at the National Automobile Dealers Association Show in San Francisco, Del Rosso told Automotive News that the brand shouldered the blame for inventory problems, such as those with the Q3."We haven't been a consistent partner, from a supply-side point of view, and we've missed not only market opportunity, but customer opportunity," Del Rosso said at the time. "My No. 1 priority is stabilizing the supply chain so that [Audi dealers] can fulfill customer demand."

An Audi of America spokesman declined further comment on the departure.

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