Audi to focus on emerging markets to push BMW out of top spot

Volkswagen AG (VOW)’s Audi will add models and expand production in emerging markets as the luxury brand aims to topple Bayerische Motoren Werke AG (BMW) as the largest premium-car maker.

“We expect further growth in the long term,” Chief Executive Officer Rupert Stadler said on March 8 at Audi’s annual press conference in Ingolstadt, Germany. “This gives us the confidence to extend our product range and expand our international activities.”

The VW division has a goal of overtaking BMW as the biggest luxury-auto maker by 2015, boosted by growth in China, India and Brazil. Deliveries in Russia are projected to more than double. Last year, it introduced an updated version of its A8 flagship sedan, the new A7 Sportback as well as the A1 subcompact, the smallest model in its 36-vehicle portfolio.

Audi, which will roll out 13 new or upgraded models this year, including the revamped A6 sedan and Q3 compact sport- utility vehicle, plans to continue expanding its lineup in the coming years at “an undiminished pace,” the carmaker said.

Net income last year doubled to 2.59 billion euros ($3.61 billion) as growing demand in China and the U.S. spurred vehicle sales to record levels, Audi said. Revenue rose 19 percent to 35.4 billion euros.

The brand aims to increase 2011 sales by more than 10 percent to over 1.2 million autos with new models also including the RS3 Sportback and a hybrid Q5 SUV. Audi targets a 2011 operating margin of about 9.4 percent of sales, the carmaker said today. The return on sales may run between 8 percent and 10 percent per year through 2015, Chief Financial Officer Axel Strotbek said in an interview.

“Our factories are buzzing,” Stadler said. “2011 will mark another year with great workload for us.”

Audi sees “considerable potential” in India, Brazil and Russia, and will expand local production to underpin its expansion, Stadler said. Sales in Russia will probably rise to about 50,000 vehicles a year by 2015 from about 18,000 now, Peter Schwarzenbauer, Audi’s sales chief said.

In addition to investment at its Chinese joint ventures, the VW unit plans to spend 11.6 billion euros worldwide on new plants, products and technologies in the next five years with more than 5 billion euros earmarked for its two German plants.

“Growth fundamentals in China remain solid,” said Aleksej Wunrau, a BHF-Bank AG analyst in Frankfurt with an “overweight” rating on VW stock. “It’s anything but a wrong strategy to keep the focus there. Even local production in Russia may be worth considering for Audi.”

Expansion also includes European sites. Audi will spend about 900 million euros over the next three years on its factory in Gyor, Hungary, to increase capacity to 125,000 cars from 38,500 last year. Audi will spend another 270 million euros on a factory in Brussels, where production of the A1 model will be increased by 20 percent to 120,000 units. Work on a new engine- testing facility at the German plant in Neckarsulm costs 90 million euros and will be completed next year.

Audi expects China, the world’s biggest auto market, to continue to expand “at a high pace” over the medium term and is currently enlarging its factory in Changchun, where the VW unit took steps in 2009 to raise capacity to 300,000 units, according to Stadler.

“We want to participate in that momentum again in 2011,” the CEO said. Audi increased Chinese sales by 43 percent to 227,900 cars and SUVs last year, underpinning its leading position in the country’s premium segment. 

(Bloomberg)