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VW Boosts Audi in Luxury Car Challenge

By Chris Reiter

(Bloomberg)—Volkswagen's (VLKAY) Audi brand aims to add eight models by 2015, challenging Bayerische Motoren Werke (BAMXY) as the world's largest maker of luxury cars.

Audi will invest 7.3 billion euros ($10.5 billion) on new models and plant upgrades through 2012, the Ingolstadt, Germany-based automaker said today in a statement. Spending on new models will total about 5.9 billion euros, or 81 percent of the budget for the four-year period that includes 2009.

The investment is part of Wolfsburg, Germany-based Volkswagen's plans to spend 25.8 billion euros between 2010 and 2012 as it seeks to become the world's dominant automaker. Audi, which ranks third behind BMW and Daimler's (DAI) Mercedes-Benz brand, will increase its lineup of cars and sport-utility vehicles to 42 models by 2015 from 34 now, it said today.

"BMW and Mercedes need to take Audi very seriously," said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen in Germany. "Volkswagen is spending a lot of money on Audi to become the best-selling premium-car maker, and Mercedes could lose its place as No. 2 as early as next year."

A1's PricingAudi's new vehicles will include the A1 compact, which is due to be introduced in mid-2010. As BMW develops a line of small urban vehicles and Mercedes-Benz prepares to invest 1.4 billion euros to expand its small-car lineup, the A1 will become Audi's lowest-priced model, spokesman Armin Goetz said in a telephone interview today.

The VW division will also introduce the A7, a large luxury- coupe that will compete with BMW's 6-Series and Mercedes-Benz's CLS. By the end of 2010, Audi will start selling a hybrid- version Q5 SUV, its first vehicle that combines an electric motor with a conventional engine. Audi will start producing the E-tron electric-powered sports car by the end of 2012.

Development of electric and hybrid cars and improvements in existing engine technology will "lay the foundations for our company's growth," Audi Chief Financial Officer Axel Strotbek said in the statement, adding that the unit will finance the investment from its own cash flow.

Audi, which raised its target for 2009 sales on Nov. 9 by 2.8 percent to 925,000 vehicles because of growth in China, aims to sell 1.5 million vehicles by 2016. BMW's namesake brand is forecast to sell 1.02 million vehicles this year, while Mercedes-Benz may deliver 950,000 cars and SUVs, according to J.D. Power & Associates estimates.

Mercedes-Benz, BMW TargetsMercedes-Benz aims to increase sales to 1.5 million vehicles by 2015, while BMW, which also sells Mini and Rolls- Royce vehicles, is targeting deliveries of 1.6 million to 1.65 million autos by 2012.

Volkswagen, Europe's biggest carmaker, has a goal of overtaking Toyota Motor Corp. (TM), the world's biggest, by 2018 in terms of global deliveries and profit margins.

Audi's investment plans include machines to stamp metal parts for the A1, engine-test tools and a new transmission and emissions-technology center in Ingolstadt.

To contact the reporter on this story: Chris Reiter in Berlin at

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