March 15, 2018 / 9:24 AM / a year ago

All change for Audi as it predicts short-term pain

INGOLSTADT, Germany (Reuters) - Audi (NSUG.DE) said it is bracing for a difficult year on Thursday as the effects of its biggest-ever model overhaul and the emissions scandal keep Volkswagen’s main earner from catching up with German rivals Mercedes-Benz and BMW.

Audi CEO Rupert Stadler (L) and CFO Alexander Seitz pose next to the Audi Q7 e-tron quatro car before the company's annual news conference in Ingolstadt, Germany March 15, 2018. REUTERS/Michael Dalder

The luxury brand of Volkswagen will launch over 20 redesigned and new models in 2018, including upgraded versions of the popular A6 saloon and Q3 sport-utility vehicle and the all-new electric e-tron SUV, with the changeover expected to hurt demand of its existing line-up.

Audi, the third biggest luxury car maker, said it aims to at least match last year’s record 1.88 million global sales, but that is the first time in years it is not projecting an outright increase. In contrast, its main rivals Mercedes in first place and BMW in second, are both expecting further sales gains.

“2018 is an exceptional year and requires a feat of strength from Audi,” finance chief Alexander Seitz said at an earnings press conference. “It will be a year of transition.”

Bottlenecks expected from introducing new vehicle tests done to harmonized world standards, and costs associated with the “dieselgate” scandal, will add further strains, the CFO said.

The model overhaul, also introducing the new Q8 SUV, is expected to have a “sustained positive impact” on deliveries and earnings from 2019, Audi said.

“By 2019, we will probably have the youngest model portfolio in the premium segment,” Chief Executive Rupert Stadler said. “Of course this will have an impact.”

Audi said its operating profit jumped more than 50 percent in 2017 to 4.67 billion euros ($5.76 billion) after special items, helped by cost cuts in development and sales and lower costs for its emissions scandal. The carmaker set aside 387 million euros for the “dieselgate” affair last year after 1.8 billion in 2016.

The luxury brand cut costs by 1 billion euros last year as part of a goal to cut spending by 10 billion euros by 2022 to free up funds for its electric-car program.

Audi, in collaboration with another of VW’s brands Porsche, plans to launch 20 electrified models by 2025, more than half of which will be all-electric.

Stadler said Audi could stop selling diesel engine versions of its compact vehicles in two or three years, starting with the A1 model, while the share of diesel-powered SUVs could rise further in coming years.

Reporting by Andreas Cremer and Irene Preisinger; Editing by Maria Sheahan and Elaine Hardcastle

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