The Audi R8 :German luxury automaker's first attempt sports car

The Audi R8 is the German luxury automaker's first attempt at producing that most rarefied of motoring beasts, a super-sports car--a high-priced combination of verve and vroom. As I drive down the main drag of this English coastal town, the road narrows and I stop to let an oncoming car through. It turns out to be a vintage Mercedes SL sports car. As the R8 idles, its 420-h.p. V8 engine purrs with a low growl, and I can't resist revving it. As the Merc passes, its driver slows to a pause, nods at the sinuous, sleek lines of the pearly dark blue R8, then smiles approvingly and says, "Simply lovely." His is a typical reaction.

By definition, a super-sports car combines a powerful engine with superb performance, agile handling and drop-dead looks to such an ultrabuffed level that it turns heads, inspires envy and justifies a stratospheric price. In this case $112,500. And clearly, the R8 seals the deal. Notes Jay Nagley, managing director of car consultancy Spyder Automotive: "Italian styling with German quality and engineering. What's not to like? It's a great brand builder."

And that's the point. As the R8 races into its second year, Audi's still building just 4,500. In 2009, it hopes to release between 800 and 1,000 of them in the U.S. And they'll go quickly. Audi says those few cars, coupled with a deft marketing campaign, will raise the company's profile in the competitive U.S. premium-car segment, where it hopes to double sales of all models by 2015 to around 200,000. "I would almost describe every one of those R8s as a mobile billboard for the Audi brand," says Johan de Nysschen, head of Audi's U.S. operations.

And its message: This is a rare automobile that few can afford, but the top-notch engineering and technology needed to design and build such a beautiful machine are evident in every model.

BMW is the world's leading premium carmaker, closely followed by Mercedes, and Audi's overarching goal is to overtake them--which won't happen without the boost in U.S. sales it's striving for. And given the shape of the U.S. economy, that task isn't getting any easier. Worldwide, however, Audi had a strong 2007. It sold 964,151 cars, 6.5% more than in 2006, and its revenue jumped almost 8% to $52.9 billion. This year, Audi has sold 516,211 cars as of June 30--a half-year sales record and a 1.4% increase over midyear 2007 sales.

While the R8 is the designated head turner, Audi's momentum is being led by its lesser beasts, such as the $32,700 A4 and the $42,950 A6. Like its German counterparts, Audi benefits from an accurate perception that its cars are expertly engineered and well made. But in recent years, Audi's been winning the style wars, turning out models, like the TT sports car, with eye-catching designs that are hugely influential and popular with buyers.

In the next year, Audi will introduce several new models aimed at consumers it categorizes as "sporty" and "progressive." Look for the Q5, a junior sibling of the full-sized Q7 SUV, as well as the Q7 TDI, which boasts a 221-h.p. diesel engine.

Still, catching BMW won't be easy. The Bavarian stalwart sold 1.5 million cars last year, nearly 336,000 of them in the States, and it is building cars at a plant in Spartanburg, S.C. That gives BMW a healthy cost advantage with the euro so strong--which is why Audi hasn't ruled out opening its own U.S. plant.

Another potential hurdle: Audi is pushing its superb diesel technology as the best way to cut emissions and lower fuel consumption. But diesels remain a hard sell in the U.S., where memories of dirty, noisy, sluggish diesels of an earlier era linger like smog. Nonetheless, Audi expects that 10% to 15% of its cars sold in the U.S. by 2015 will be diesel.

Puny greenbacks and diesel issues aside, Garel Rhys, an emeritus professor of automotive economics at Cardiff Business School, says, "Audi's closing the gap quickly." Five years ago, Audi wasn't competitive, but now it outsells BMW in several European markets. Nagley's not sure there's much that BMW can do to halt that design-driven momentum. "It's not been able to stop Audi in Germany, the U.K. and the rest of the world, so why should it be able to stop it in America?"

Audi's been a consistent winner of the 24-hour race at Le Mans, and the R8's bloodlines flow directly from those victories. The low-slung, squat R8 grips the road with comforting authority. Likewise, it navigates twisty country roads with commanding agility. Such performance doesn't come cheap. The $112,500 price is more than for most Mercedes and BMW roadsters, but less than what you'd pay for, say, a Ferrari or Lamborghini.

Designing a car to be priced higher than its German rivals was an exercise in brand positioning, says De Nysschen. "We think we found a sweet spot in the market." Bentley--which, like Audi, is part of the Volkswagen Group--successfully exploited a similar luxury-market niche when it positioned itself between supercostly Rolls-Royce and the sedans and coupes of BMW and Mercedes.

Of course, the R8 is also more expensive than most Porsches, and Porsche recently became Volkswagen's biggest shareholder. But, says John Wormald, managing partner of consultants Autopolis, because Porsches and the R8 occupy different niches, "they don't cannibalize each other."

In the near future, expect to see a convertible version of the R8. What you won't see is huge numbers of R8s on the road. Ever. Rhys thinks Audi will keep global production at 4,500 for the time being, though it could eventually push it to 6,000. Even so, that's still not many cars. Which is the idea. De Nysschen insists Audi will ensure that demand for the R8 always outstrips supply--to keep its aura of exclusiveness intact. "In that market segment," he says, "the difference between too many and too few cars is one."