In just five years Audi has become the second largest luxury car maker in India thanks to Michael Perschke's strategy: Focus on class defining leaders
Coming out of a meeting with Michael Perschke, it’s near impossible to think of him as anything but a cowboy who spouts wisdom from the American Wild West, of the kind Will Rogers, that cowboy and comedian from the 1920s, would. It is easy to imagine Perschke saying what Rogers had said: “There are three kinds of men: The ones that learn by reading; the few who learn by observation; the rest of them have to pee on the electric fence.”
Extrapolate his native wit and wisdom to the Indian luxury car space and this much is clear—there’s a gunfight on with three gun slingers at the bar. The BMW, or Bimmer as aficionados like to call it; the iconic Mercedes that generations of Indians have grown up with; and the newest entrant on the block, Audi. Michael Perschke heads Audi’s India operations.
It was inevitable therefore that I’d ask him what he thought about competition. A few weeks ago, at a press conference, Peter Honegg, MD and CEO of Mercedes-Benz India, said he doesn’t want to be in the numbers game. “Sorry, that’s bullshit!” Perschke told me in a matter-of-fact, gun slinger tone. “Everybody is here for the numbers because there are only four places left in the world to fight it out—China, Russia, India and Brazil. Every place else, the turf’s been taken. So if you’re not here for the numbers today, tomorrow you’re out.”
To rub it in, he added, what Mercedes is really saying is that they’ve been beaten. That they’re couching facts and trying to put it as politely as they can. It’s difficult to argue with Perschke because he’s got the numbers to prove it.
During the first three months of this year, Audi sold 2,269 cars while Mercedes sold 2,130. That makes Audi the second largest luxury car maker in the country after BMW. To put things into perspective though, BMW’s ahead of Audi by just 100 units. Pause for a moment now and take these numbers in.
l Through all of 2008, Audi just about managed to sell 790 cars.
l BMW managed to sell 2,900-odd and Mercedes a little over 2,400.
They tell you a couple of things.
l In four years, the market for luxury cars in the country had quadrupled.
l If this were a shootout, Audi is the cowboy that’s come out of nowhere, and Perschke doesn’t want to be the one who gets to pee on the electric fence. “I want to be Number One,” he says.
Call it arrogance, call it gumption on his part. But after listening to him, I’m tempted to think of him as the kind of man who’s learnt by observation. “I asked what does it take to get to be Number One? What will it take each department in the company and each dealer to get us there? The key lies in synchronising everyone. So first, you got to orchestrate that vision and take it down the entire value chain…each person in the organisation ought to know, what will be their contribution,” he says.
For 20 years, Mercedes was the undisputed king. Then BMW came in and attempted to wean the younger generation who had money on their hands. BMW got its toehold into the country by using a bottom up strategy and introducing its entry-level cars. These were readily embraced by the younger buyers. This gave BMW the confidence to launch more expensive variants and over time, the strategy allowed it to displace Mercedes as the most favoured luxury car in India.
So, five years ago, when Audi started to look at India, it had a dilemma on its hands: Mercedes had the top-end and older generation to itself. BMW was all over the place with the younger generation on its side. Where does Audi fit into the scheme of things? So Benoit Tiers, who was then Audi’s India CEO, thought up a strategy. No point competing with the big boys and stand the risk of getting lost in the crowd. So he ruled out plush sedans and looked for a niche. “We told ourselves that because many Indians don’t know Audi, we need to make a statement. And to make a statement, we need to be at the absolute top of the pyramid,” recalls Perschke.
The outcome of this thinking was the launch of the Audi Q7, a luxury sports utility vehicle (SUV). Neither BMW nor Mercedes offered anything like it in India. It got Audi the intended results in terms of brand building. One of its first buyers was actor John Abraham who latched on to it even before the model was launched. “He enquired even before we came to India,” says Perschke. He calls it the “Halo Model” around which a brand’s identity is built. Audi was content keeping it that way for a few years. In that sense, the company got lucky because celebrities wanted to be seen with the car.
But big guys don’t bring volumes, so how do you get the numbers? I ask him. His answer is a fairly routine one. “Volumes come from strong dealer networks.” But how he goes about it isn’t routine. “I look for some values when scouting for potential dealers. The first question I ask is, is he hungry enough to want to be Number One? We don’t want kids with golden spoons; we don’t want portfolio investors; we don’t want people who just want to add Audi as a stamp in their collection.” With that mandate clear, his team goes around the country looking for local entrepreneurs who enjoy patronage in their social circles.
(This story appears in the 22 June, 2012 issue of Forbes India. To visit our Archives, click here.)