There is a lot of buzz about the Audi plant that will be built in San José Chiapa, Mexico. The press refers to it as "Audi's first car plant in the Americas," but this is not correct. Audi produced the A3 in São José dos Pinhais, Brazil between 1999 and 2006, in a factory now totally owned by Audi's parent company, Volkswagen. Golf (still in its fourth generation), Fox and SpaceFox are produced there. It was a joint venture between Audi and Volkswagen – Audi had 25% of the factory.
The A3 brought new technologies to a made in Brazil vehicle, such as xenon headlights, and its turbo engine, with 180 hp, was the dream of many "street pilots." The A3 was part of a complex business model, where a company named Audi do Brasil produced it and Senna Import, owned by the Formula 1 pilot Ayrton Senna, was in charge of selling it. Using innovative marketing strategies, Senna gave a luxury image to Audi that the make lacked in Europe at that time.
Before the existence of the A1, the A3 was the first step into Audi's luxury world. It was more successful than the Mercedes-Benz A-Class, also produced at that time in Brazil. The A3 was the model that trendy, preppy wannabes desired. Meanwhile, the A-Class was considered by some to be "a woman's car."
When the A3 got a new generation in Europe, Audi decided it was too expensive to be produced in Brazil. Besides, the Volkswagen Golf would not change in Brazil and a lot of shared parts between both would be lost. Volkswagen opted for a face-lift to give some extra life to its hatchback, but consumer research pointed that Audi's client would not accept such an inexpensive solution.
With an aging A3 and a lot of uncertainty about its future, Audi sales could not stop falling. In 2003, for example, it sold 7,830 vehicles in Brazil (92% were A3s), but only 3,271 units in 2010 (41% of A3s). In 2003, there were only eight models for sale; seven years later, there were 12 models, but the dealer network was drastically reduced.
Mercedes also ended production of the A-Class in Brazil when the new generation came to Europe. It used the factory to assemble the C-Class that was exported to the United States, while Brazil sold the German one and later the CLC. Currently, it produces heavy trucks in the plant that many say did not close down because of subsides from local governments. Both Audi and Mercedes imported the new generations to Brazil and the A-Class was a commercial disaster, with only 11 units sold in 2007, its last in Brazil. In the same year: 1,176 A3s were sold.
BMW was the premium brand that benefited the most. It became the market leader in 2007, went to the second spot in 2008 and 2009, and was again the leader in the following years. Last year, it almost doubled Audi's sales. Curiously, BMW has plans now to build light vehicles in Brazil, the 1-Series and the X1. If that happens – the announcement should be anytime during this month – we forecast BMW's market share will go from 0.38% in 2011 to 0.75% in 2021. Sales would skyrocket to 37,000 units from 13,244. Audi's forecasted market share in 2021 is 0.26% and Mercedes would have 0.38% of the Brazilian market.
It looks like this is one of the rare cases in the business world where the last company to enter the market is the most successful one.
Posted by Augusto Amorim, Lead Analyst – South America Forecasting, Polk (09.11.2012)