Automobile

Audi testing EV post-sale upgrades to supplement future revenues

Executives at Audi explained a business strategy that includes eliminating internal combustion vehicles by 2033 and diversifying revenue streams to include a new focus on post-sale temporary software “upgrades” that it will share with its dealers.

The strategy for the coming decade — laid out to reporters online Wednesday as part of a multiday briefing on where Volkswagen’s premium auto brand is heading — would see the last new ICE-powered vehicle in its lineup introduced in 2025, and transitioning between then and 2033 to an all-battery-electric-vehicle lineup.

John Newman, head of digitalization at Audi, said the automaker is in the field with consumers testing a variety of digital consumer offerings that Audi believes will supplement its revenues in future decades as EV sales grow.

“We’re really focused on introducing solutions that we can introduce across multiple platforms, and so this gives us access to millions and ultimately 10 million vehicles at once,” Newman said. The strategy “really causes us to focus very clearly on business that happens after we sell the vehicles, so this is a bit of a change.”

Newman, an American who previously worked for McKinsey & Co., and who was a National Science Fellow at the Massachusetts Institute of Technology, said Audi sees additional post-sale EV revenue potential from “charging, experience, and then obviously there’s the ownership and usage phase, and the maintenance phase.”

He said the German brand is also pursuing revenue ideas from “second-life opportunities” from the battery packs, as well as a new focus on aftermarket parts and accessories.

Audi is testing different ideas right now with customers operating under nondisclosure agreements to “figure out the right value proposition” for customers paying additional funds to upgrade their vehicles, Newman said.

“We found that there are opportunities for us to do new things in terms of products and services for customers,” Newman explained, adding that Audi is experimenting with how long such upgrades would last. “We treat that as an empirical question: Does temporary mean one hour? Does it mean a day? Does it mean a month? What we have to do is, we have to find the right balance between what the product offering is and how long people want to have that.”

Newman said that Audi is committed to sharing these new revenues with its dealers around the world.

He said: “What we want to look for are opportunities for dealers to bring new sources of value to the customer, and in that sense, absolutely, we are committed to share the revenue and share the profitability of these opportunities with our dealers.”

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