Even with the challenges posed by low oil prices and an ongoing emission scandal, Audi Volkswagen’s regional chief Benoit Tiers predicts a bright future for his brand in the region.
By Ghaith Madadha
With sales of 11,000 cars, Audi said it managed to sustain its volumes in the Middle East last year. This was achieved despite the potential of low oil prices hampering consumer demand in key Gulf markets, and a diesel emissions scandal that continues to dog global sales of Audi’s parent company, Volkswagen.
Speaking at the launch of several potentially big-selling models at this year’s Qatar Motor Show, Audi Volkswagen Middle East’s Managing Director Benoit Tiers said he’s confident his brand has a solid standing in the region.
Has the sustained drop in oil prices and the effects it’s had on the Gulf states budgets affected Volkswagen’s and Audi’s sales in the region? And conversely, have more affordable fuel prices emboldened customers in some regional markets?
The region has no official registration data to allow us to clearly analyze if there was an effect in 2015. The analysis from our internal figures is that the market was more stressed in the second half of 2015. We expect 2016 to be a challenging year for the automotive market in the region, and we are looking at stabilizing the volume between 2015 and 2016. In other words, we don’t see a dramatic collapse of the market. It will be a stable market, or at least a market that we can have a stable result.
What about Jordan in particular?
Jordan is a very specific market in the region, because regulations towards electric and hybrid vehicles push that market into a very high share of non-pure petrol engines. We have to look at that market from a different angle than other markets.
Will the anticipated end of Iranian sanctions be the expected sales boon, or will low oil prices and continued conflict dampen such an effect?
It’s a bit early to say, but of course if a market the size of Iran is suddenly opening to foreign investment and to imports, there is potential for our brands. It will take time and you don’t create a network overnight. Whenever sanctions will be officially lifted, we’ll be able to comment more.
Do you think that low oil prices combined with greater combustion engine efficiency and lightweight construction will reduce demand for and investment in hybrid and electric vehicles, especially in the Middle East?
At the moment, in the Middle East, hybrid and electric vehicles have a very low market share. One reason is customers’ wish to drive big petrol engines, and with petrol being cheap, there aren’t big concerns from them. The second reason, which is less known by customers, is that an electric car runs with batteries and needs not only infrastructure to be recharged but needs to be able to cope with extreme hot weather in the region. If you run an electric car with a battery and need to have you’re A/C running full speed all the time, it depletes your batteries very fast. We believe the trend will come, so we will get cars ready.
The Volkswagen emissions issue specifically pertains to diesel engines, but what has been the fallout, if any, in the Middle East, which is not a diesel intensive market and where diesel passenger cars are outright banned, such as in Jordan?
We actually don’t sell any diesel passenger cars from Volkswagen and Audi in the Middle East, so we are not concerned by any diesel issues here.
The Volkswagen Group’s emissions testing issue with the United State’s Environmental Protection Agency is not the first such incident in the auto business and there has been speculation of similar practices. Do you think Volkswagen was unfairly singled out for scrutiny?
This is a very important topic for our group, and the group is doing everything it can to solve those problems. There have been things that should have been done differently and they have to be fixed. Our main focus is to gain trust from our customers again. This is what the group is focusing on, with technical solutions to be implemented before the end of 2016 to all cars which are involved.
The whole affair has been costly—both in terms of money and reputation—to Volkswagen. How do you plan to regain consumer confidence?
On the short-term, the first thing is to fix the cars for our customers, so there’s a huge recall which is happening in Europe and the United States for all cars to be set up to the right software. In the mid and long-term, the group is investing a lot to develop further options of alternative drive. Volkswagen has already presented the Golf GTE and Audi is planning to introduce a full electric vehicle by 2018. The future of the group comes with investment and new products.
Audi has been perhaps the most aspirational of the premium German brands during the past few years. What’s on the horizon for Audi?
Lots of things. In Qatar, we just introduced five new models. We are also preparing ourselves for the next generation, and Audi is exploring new segments, especially in the SUV market.