Bloomberg News

Audi Sees New Performance Cars Joining A3 to Drive 2013 Growth

May 16, 2013

Audi AG (NSU), the world’s second-largest maker of luxury cars, said high-performance cars like the RS5, as well as the new version of the A3 compact, will help propel sales this year amid intensifying economic headwinds.

“We aim to increase sales of high-performance cars by one third” in 2013, Chief Executive Officer Rupert Stadler said today in the text of a speech to be delivered at the manufacturer’s annual shareholders meeting in Neckarsulm, Germany. Audi sold about 11,000 of its RS and R8 sports cars last year. “We want to, and we will, grow further in 2013.”

Profit from Audi is critical to financing parent Volkswagen AG (VOW)’s strategy to overtake General Motors Co. (GM:US) and Toyota Motor Corp. (7203) as the world’s biggest automaker by 2018. Audi accounted for 56 percent of the Wolfsburg, Germany-based manufacturer’s first-quarter operating profit and VW CEO Martin Winterkorn pledged last month to increase the group’s presence in the premium-car segment, where profit margins are higher than for mass-market models.

Volkswagen, Europe’s largest automaker, also owns sports-car maker Porsche, British luxury-car producer Bentley and the Lamborghini and Bugatti supercar brands.

Audi shareholders are scheduled to elect Ursula Piech, the wife of VW chairman and former CEO Ferdinand Piech, to the division’s supervisory board at today’s meeting. She joined the board of parent VW last year. VW controls 99.6 percent of the stock in Ingolstadt, Germany-based Audi, and has a domination and profit transfer agreement in place.

Margin Forecast

The division is forecasting sales to rise in 2013 after it delivered 1.46 million cars last year. Audi reiterated it expects a “slight” increase in revenue this year and an operating margin at the upper end of its long-term target range. Operating profit last year climbed 0.6 percent to 5.38 billion euros ($6.9 billion) as revenue rose 11 percent to 48.8 billion euros. The margin was 11 percent of revenue, above its target of 8 percent to 10 percent.

Audi plans to dethrone Bayerische Motoren Werke AG (BMW) as the world’s best-selling premium-car maker by the end of the decade. It ranks second after overtaking Daimler AG (DAI)’s Mercedes-Benz brand in 2011. Mercedes narrowed the sales gap to both BMW and Audi last month as new versions of its A- and B-Class compacts attracted buyers. Analysts, including Juergen Pieper at Bankhaus Metzler in Frankfurt, expect the growth to continue in the second half of the year.

Competitor Deliveries

Global deliveries in April by Stuttgart, Germany-based Mercedes jumped 12 percent from a year earlier to 116,566 cars and sport-utility vehicles. Sales at Munich-based BMW’s namesake brand rose 7.5 percent to 130,598 cars and SUVs, while Audi’s deliveries increased 6.6 percent to 133,500, according to data from the manufacturers.

BMW’s four-month deliveries rose at a faster rate than at its two main competitors, with a 7.1 percent jump to 512,000 cars and SUVs versus Audi’s 6.7 percent gain to 503,000 deliveries and 5.6 percent growth to 441,464 at Mercedes.

The German luxury-car makers, all of which are targeting sales increases this year, have fared better than Europe’s mass-market auto manufacturers as rising demand in China and the U.S. offsets a sixth straight year of industrywide declines in their home region.

BMW, Mercedes and Audi are boosting production capacity outside Europe to tap rising demand and reduce exposure to currency swings.

Audi held the groundbreaking for a new plant in Mexico earlier this month and is considering to start producing cars in Brazil. It’s adding to an existing plant in Hungary and will open a factory in Foshan, China, later this year.

The expansion is part of Audi’s efforts to break out of its Germany-dominated production network. Until four years ago, Audi produced 75 percent of its vehicles in Ingolstadt and Neckarsulm. By 2017, the share of the German plants is forecast to fall to 45 percent as annual production rises to 1.9 million vehicles from 1.5 million units last year, according to data from IHS Automotive.

Audi expects produce more cars next year outside Germany than within the country for the first time.

To contact the reporter on this story: Christoph Rauwald in Neckarsulm at crauwald@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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