Bloomberg News

Audi May Double China Output to Fend Off BMW, Mercedes

October 19, 2011

(Updates with comment from analyst in seventh paragraph.)

Oct. 20 (Bloomberg) -- Audi, Volkswagen AG’s luxury-car unit, may more than double production in the world’s largest automobile market in four years to meet rising demand for high- end passenger cars, its China chief said yesterday.

The company plans to expand annual manufacturing capacity in China to as high as 700,000 vehicles by 2015 depending on market demand, from 300,000 units now, said Dietmar Voggenreiter, Audi’s China president. The automaker is considering building a second plant in addition to the one in Changchun, he said, declining to specify the investment amount or the plant’s location.

“You see a lot of young customers and young families now buying premium cars,” Voggenreiter said in an interview in Changchun city in northeast China yesterday. “Nowadays, the upper middle-management customers are growing and this is our main customer focus.”

The automaker, whose headquarters are in Ingolstadt, Germany, is counting on China, its largest market, to help it overtake Munich-based Bayerische Motoren Werke AG in global luxury-car sales by 2015. Audi accounts for about one-third of the luxury-car market in China, outselling BMW and Daimler AG’s Mercedes-Benz, according to J.D. Power & Associates.

Audi, BMW and Mercedes are targeting record sales this year, helped by China. The world’s second-largest economy will grow 9.5 percent this year, six times the pace of the U.S. and euro area, according to International Monetary Fund estimates released last month.

Vibrant Lineup

Audi may produce an electric car in China, said Voggenreiter, who has headed the carmaker in China since November 2006. The company makes the A4L, A6L sedans and Q5 sport-utility vehicles with its partner China FAW Group Corp.

“While Audi has a strong reputation amongst Chinese consumers, it needs a more vibrant lineup,” said Namrita Chow, a senior analyst at IHS Automotive in Shanghai. “Wealthy Chinese consumers are increasingly aware of luxury brands, and younger consumers are looking for different variants.”

Audi, headed by Chief Executive Officer Rupert Stadler, said last month it expects China deliveries in 2011 to exceed 300,000 vehicles for the first time. Audi sold 223,631 cars in China during the first nine months of the year, an increase of 29 percent from 2010, the company said in an e-mail. The German carmaker aims to sell 360,000 next year, IHS’s Chow said.

Losing Share

Voggenreiter declined to comment on 2012 sales, saying only that he was “optimistic” about the market. Audi will introduce its full range of products in China to boost import sales, he said.

Audi, maker of the 355,000-yuan ($55,650) A6L, China’s top- selling car since 1999, was the first luxury automaker in the country when it entered the market 23 years ago. Its share of the high-end market has fallen to about 30 percent in the first half of 2011 from 40 percent in 2009 as BMW and Mercedes boosted production and introduced new models, according to J.D. Power.

BMW’s market share has risen to 25 percent from 21 percent in 2009, while Mercedes has 22 percent, up from 16 percent, data from J.D. Power show. Audi’s sales will rise 24 percent in 2011, trailing BMW’s 60 percent growth and Mercedes’s 42 percent, according to the researcher.

Audi sales were affected by a temporary stoppage at its Changchun factory in the first quarter after the automaker upgraded its facilities to boost capacity, Voggenreiter said.

“We are back on track now,” he said. “We had to have a pit stop. After the pit stop, with new tires, we will make new time records.”

--Liza Lin. Editors: Chua Kong Ho, Terje Langeland

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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