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Audi Targets Sales Gain This Year on Expanded SUV Lineup

Audi AG Chief Executive Officer Rupert Stadler
Audi AG Chief Executive Officer Rupert Stadler said, “We will grow further in 2013. We will reach the mark of 1.5 million car sales earlier than planned.” Photographer: Guenter Schiffmann/Bloomberg

Audi AG is targeting an increase in revenue and deliveries this year on demand for its expanding SUV lineup and new A3 derivatives as the world’s second-biggest maker of luxury vehicles seeks to nab the top spot from Bayerische Motoren Werke AG by the end of the decade.

“Every fourth premium automobile is an SUV these days,” Chief Executive Officer Rupert Stadler told reporters today at the marque’s headquarters in Ingolstadt, Germany. “That’s why we’re creating a broad offering: more sportiness, more diversity, more profile, less fuel consumption.”

Audi plans to double its offering of sport-utility vehicles by 2020, when Stadler says sales of such models will account for 33 percent of high-end deliveries, a person familiar with the matter said last month. The Volkswagen AG unit is developing the Q2, Q4 and Q6 as sportier alternatives to its current range of three SUVs, the person said at the time.

Audi will invest 11 billion euros ($14.3 billion) by 2015 to increase production and widen its model lineup in pursuit of BMW. To push growth, Audi is expanding a plant in Hungary and opening a new factory later in 2013 in Foshan, China. BMW has a narrow 407-vehicle sales lead over Audi through February, recapturing the top spot nabbed briefly by Audi in January.

“We will grow further in 2013,” Stadler said today. “We will reach the mark of 1.5 million car sales earlier than planned,” he said. Audi, which sold 1.46 million vehicles last year, initially planned to achieve that goal in 2015.

Higher Deliveries

Audi is targeting higher deliveries this year on demand for its Q3 and Q5 SUVs, as well as the next-generation A3 Sportback introduced last month and the S3 performance version of the model coming out this summer. A sedan version of the A3, which the automaker is targeting at American and Chinese buyers, is set to reach showrooms later this year.

Audi forecast a “slight” increase in 2013 revenue and plans to reach 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 as revenue rose 11 percent to 48.8 billion euros. Operating profit as a percentage of sales was 11 percent, above a target of between 8 percent and 10 percent.

Luxury-car makers have fared better in recent years than mass-market manufacturers as an appetite for upscale vehicles among affluent buyers remains robust in China and North America. Still, automakers are bracing for a sixth straight year of declining European sales, with deliveries in January at the lowest for that month since records began in 1990.

Shares Drop

“The outlook appears rather conservative,” Commerzbank AG analyst Sascha Gommel said of Audi’s forecast. “But considering the weak European market, a cautious outlook is hardly a surprise.”

Volkswagen dropped as much as 3 euros, or 1.8 percent, to 165.85 euros and traded 1.2 percent lower as of 2:28 p.m. today in Frankfurt. The German automaker has declined 3.1 percent this year, valuing VW at 75.1 billion euros.

Audi will start construction in May of a new plant in Mexico, where it plans to build the Q5 beginning in 2016. Local production in Mexico will reduce exposure to swings between the euro and dollar. Audi is also preparing to start assembly of the Q5 and Q7 at VW’s factory in Kaluga, Russia, to sell locally, production chief Frank Dreves told reporters.

Expanding Production

“In the coming year, Audi will for the first time build more cars outside Germany than within,” Stadler said, adding that the Russian market offers promising growth potential and that establishing production in Brazil remains an option. “Brazil is a very, very interesting market,” he said.

BMW regained the top spot in luxury sales from Audi last month on rising demand for the 3-Series and X1 SUV, while Daimler AG’s Mercedes-Benz brand fell further behind its German rivals. Mercedes is also seeking to topple BMW as the market leader by the end of the decade. Audi wants to boost annual sales to 2 million cars by 2020.

The world’s three biggest makers of premium vehicles all posted fresh sales records last year and expect demand to rise further in 2013 as growth in China and North America more than offset the shrinking demand in Europe.

The European market might remain “flat” for another three years because problems like high unemployment and large amounts of sovereign-debt take time to resolve, Stadler said.

VW, Europe’s largest automaker, forecast on Feb. 22 that 2013 operating profit will match last year’s level, falling short of analysts’ estimates, as the shrinking auto market in its home region weighs on results.

Earnings before interest and taxes, which rose 2.1 percent to 11.5 billion euros in 2012, probably won’t increase this year, Wolfsburg, Germany-based VW said.

Volkswagen plans to release detailed quarterly and divisional earnings at a press conference on March 14.

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