New A3 Supply Assured, Sedan To Invigorate Small Luxury Market: Audi Oz Photo:
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Tony O'Kane | May, 28 2013 | 6 Comments

The all-new A3 Sportback range is now in Australia, and Audi has high hopes that its reinvigorated small hatch will deliver a sizeable sales boost for the brand over the coming year.

And while the A3’s chief rival, the Mercedes-Benz A-Class, has been hamstrung by tight supply, Audi is confident it will be able to meet what it expects will be very strong demand for its newest car.

Starting at just $35,600, the entry-level A3 Attraction 1.4 TFSI is expected to enjoy much greater popularity than the previous A3 base model, which retailed for $41,200.

The 1.4 TFSI entrypoint and the mid-grade 1.8 TFSI Ambition (which retails from $42,500) are expected to account for the bulk of A3 sales.

And, according to Audi Australia’s Matthew Dale, Product Planning Executive for the A3 line, the reduced cost of entry hasn’t come at the expense of performance or equipment.

“The priority for us was not to reduce the price through de-contenting the car,” Dale told TMR at the A3’s local launch in Cairns.

“We strongly looked at increasing equipment, while decreasing the price.”

He added that the strength of the Australian dollar played an instrumental part in reducing the A3’s sticker price.

“Quite a large part, actually. Basically exchange rate and the cost savings inherent in the MQB platform were responsible,” he said. “Typically, Audi is known for adding value to our cars."

“We’re not known for decreasing prices, but with the substantial cost savings of the new-generation A3 platform and the exchange rate that’s how we managed to get the price down.”

Merc's A-Class: a top-seller, but struggling with supply." class="small img-responsive"/>
Merc's A-Class: a top-seller, but struggling with supply.

With sales of the Mercedes-Benz A-Class booming since it launched in March this year, there’s clearly plenty of demand in the small luxury hatch segment.

In its first three months on sale, Mercedes managed to sell 745 A-Class cars, with demand so strong and supply so tight that the company had to sell off much of its press fleet soon after launch.

Although Audi’s sales forecast of 200 A3s per month is roughly the same as Mercedes-Benz’s initial estimates for A-Class volume, Audi Australia doesn’t expect it will suffer from the same supply issues as Mercedes.

“We’re not restricted in production. Production is really open to us in terms of volumes,” Dale said. “The outgoing model in its run-out phase we sold around a hundred a month."

“1200 units a year is pretty strong for an outgoing model that hit our market in 2004, which is a pretty long model cycle."

“With the new one, I think for a full fiscal year we’d be looking at doubling that. We’d be looking at selling over 2000 vehicles. That’s what we’d aim for. “

Dale is also optimistic that the reduced pricing for the new A3 will steal customers from non-luxury brands, as well as existing luxury car owners looking to downsize.

“We play it quite conservatively with targets, but with the new price point I guess we are going to conquest some customers, potentially from the mass-market brands as well as downsizers already in the luxury market," he said.

“We’ve never been in this price bracket before though, so we don’t know exactly how large that conquest rate is going to be."

“But dealers will have sufficient stock and the stock is continuing to come. So we definitely don’t have any restrictions on supply.”

The A3 range will be bolstered in September this year when the all wheel drive 1.8 TFSI quattro and super-efficient 1.4 TFSI with cylinder-on-demand technology arrive.

In December, the S3 Sportback will take its place as the halo car for the A3 hatch range.

But the A3 story doesn’t end there. At the start of 2014, Audi will find itself in new territory when it launches the A3 sedan range.

There are currently no manufacturers with a sedan in the small luxury segment, although Mercedes-Benz will launch its CLA small sedan here later in the year.

By the time the A3 sedan arrives in the first quarter of 2014, it and the CLA will have a duopoly on the small luxury sedan segment.

For Matthew Dale, the A3 Sedan has significant sales potential, and although pricing has yet to be ironed out, the sedan range’s specifications will largely mirror that of the Sportback.

“My job now that A3 Sportback is here, is A3 Sedan,” he said.

“We’re only just now getting into pricing discussions with Germany, and we’ll be trying to bring that car into the country as competitively as possible with the same high level of equipment as the Sportback.

As for whether the A3 and S3 Sedan could cannibalise sales of the A4 Sedan range (which starts at $55,500), Dale reckons there will be enough distance between the two models to ensure they don’t step on each other’s toes in the showroom.

But what it will do, says Dale, is enable Audi to capture not only those who are downsizing, but those who are upsizing.

“Obviously with the movement in the market there are people moving out of, say, large sedans into SUVs, but also medium sedans into smaller cars. There’s a downsizing trend for sure.

“So we’re going to get people downsizing, yes, but there will be also be customers moving up from something like an A1 into an A3 sedan.”

With some 2000-plus A3 Sportbacks expected to be sold in the new model’s first year on the market, the car will be instrumental to Audi’s goal of lifting its annual sales volume to over 15,000 cars by the end of 2013.

When the A3 Sedan arrives in 2014, the additional volume generated could see the A3 range return as the most popular nameplate in Audi’s stable, eclipsing the popular Q3 and Q5.

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