You make cars, and you want to sell more cars in another country around the world. You don’t have a factory in that other country. Should you build one there?
The short answer is yes, at least from a lean standpoint. But does it ever make sense to NOT build that factory, and just keep exporting cars across the ocean?
Audi thinks so, according to what one of its executives said at the Automotive News World Congress recently. I find that interesting, and I’m reporting on it here in hopes of sparking some discussion of this point.
The comment came after a presentation by Johan de Nysschen, executive vice president, Audi of America.
The key point of his speech was that even though Audi is an extremely successful luxury brand on a global basis, it sells relatively few cars in the
“We are very Euro-centric, which is the biggest difference between Audi and our friends from
Audi is already the leading premium brand in
Following his talk, de Nysschen was asked the obvious question by a member of the audience: How can Audi do all this and continue to make money exporting cars from
The answer, at least for now, was no, and de Nysschen gave several reasons. First, he said, it doesn’t pay to build a plant on this continent unless that plant will produce at least 100,000 vehicles a year – and Audi anticipates selling 90,000 here this year.
Second, he said Audi cars feature extensive sophisticated technology produced by European suppliers, and that technology would have to be imported from
Third, he said Audi was unlikely to expand capacity through new construction anywhere “until we’ve used up more capacity from our colleagues at VW.”
There might be some validity to de Nysschen’s first point about volume, though it certainly seems Audi will pass that 100,000-vehicle threshold within just a few years if its strategy succeeds – and it would take more than a year to build a new plant and begin operations.
The second justification seems a bit dubious. Are there no companies in
And while I understand the third point, simply having excess capacity doesn’t justify using it if it’s in the wrong place. GM and Ford are building factories in
Is Audi’s position smart or dumb? Post a comment and let us know what you think.