Audi 2014 Profitability Narrows on Spending for New Autos

Audi AG’s profitability slipped in 2014 as the luxury-car division of Volkswagen AG invested in adding manufacturing capacity and developing new models like the revamped Q7 sport-utility vehicle.

Operating profit narrowed to 9.6 percent of sales last year from 10.1 percent in 2013, Audi said Tuesday in a statement. The margin this year will be within the manufacturer’s 8 percent to 10 percent target corridor.

“In 2014, we delivered more than promised,” Chief Executive Officer Rupert Stadler said at a press conference at Audi headquarters in Ingolstadt, Germany. “After a very positive start into the current business year, we’re targeting a new sales record.”

To underpin expansion plans, Audi is spending about 4.8 billion euros ($5.2 billion) a year through 2019, a 9 percent increase from its previous rolling five-year budget. With models ranging from the $18,400 A1 hatchback to the $165,000 R8 sports car, the world’s second-largest maker of luxury autos is pushing to overtake No. 1 BMW by the end of the decade. Audi’s deliveries in the first two months of 2015 exceeded BMW’s by almost 4,300 vehicles.

Ebit Rises

Audi’s revenue last year rose 7.8 percent to 53.8 billion euros, while earnings before interest and taxes increased 2.4 percent to 5.15 billion euros. The brand is Volkswagen’s biggest earnings contributor and key to the Wolfsburg, Germany-based company’s goal of overtaking Toyota Motor Corp. as the world’s biggest carmaker.

In addition to the Q7 and standard-fuel and electric-powered variants of the R8 coming out this year, Audi is revising its best-selling A4 lineup, with the new model to be presented at the Frankfurt auto show in September. Even as the A4’s changeover is likely to temporarily reduce demand for that model, Audi said it expects to deliver “significantly more” cars in 2015.

A version of the flagship A8 sedan, targeted for rollout in 2017, “will be the first model with which we move from assisted to piloted driving,” Ulrich Hackenberg, Audi’s development chief, said at the press briefing. The division is also preparing a battery-powered SUV with a range exceeding 500 kilometers (310 miles) to go on sale in early 2018, he said.

Volkswagen fell as much as 0.2 percent and was trading down 0.1 percent at 232.05 euros as of 10:48 a.m. in Frankfurt, reversing a gain of as much as 0.6 percent earlier in the day.

VW’s Forecast

VW said last month that efforts to increase earnings in 2015 might face economic headwinds in markets including Russia and Brazil. It forecast a profit margin in a range of 5.5 percent to 6.5 percent, compared with 6.3 percent last year.

In the first two months of 2015, Audi’s deliveries rose 7.4 percent to 260,250 autos. While that’s almost twice the projected growth in the global car market this year, Daimler AG’s Mercedes-Benz, the third-largest maker of luxury vehicles, narrowed the gap as sales jumped 14 percent to 246,135 cars. BMW’s two-month deliveries increased 5.7 percent to 255,981.

The profit margin at Mercedes last year amounted to 8 percent of revenue. BMW has yet to report earnings.