Audi Said to Keep Investments Stable Amid VW Push to Lower Costs

  • Division said to plan 3.3 billion euros in spending in 2016
  • Brand plans battery-powered car, 60-vehicle lineup by 2020

Audi AG plans to keep capital spending stable in 2016 even as parent Volkswagen AG reins in investment across its 12 automotive brands in the wake of the diesel-emissions cheating scandal, according to people familiar with the matter.

The luxury-car division, the biggest contributor to Volkswagen’s earnings, has earmarked some 3.3 billion euros ($3.62 billion) in spending for next year, in line with the 2015 total, said the people, who asked not to be identified as the figures are confidential. Audi said Monday that investments in 2016 will exceed 3 billion euros as the company introduces a compact sport utility vehicle and develops an electric car.

Audi’s plan underscores Volkswagen Chief Executive Officer Matthias Mueller’s struggle to safeguard the group’s strategically important projects while preparing for billions of euros in financial fallout from the scandal. Wolfsburg, Germany-based Volkswagen decided last month to invest 12 billion euros in factories, equipment and model development next year, down from an earlier 12.9 billion-euro budget. Both the parent company and Audi have provided only annual spending plans rather than updating a rolling five-year figure.

A spokesman for Ingolstadt, Germany-based Audi declined to comment beyond the division’s statement Monday on the 2016 investment program. VW declined to comment.

Earnings Producers

Volkswagen is Europe’s biggest carmaker, with the namesake VW brand its top seller. That division also accounts for the bulk of the 11 million vehicles affected by the diesel emissions test-cheating software that came to light in September, though cars from Audi and, to a lesser extent, Porsche are also involved. Those two upscale marques generated about two-thirds of group operating profit in the first half of 2015.

Among projects outlined for next year, Audi said it will begin deliveries of the compact Q2, a model previously referred to as the Q1, and a new version of the mid-size Q5 SUV. The division also reiterated a commitment to introduce a purely battery-powered vehicle by 2018 as part of an expansion of its lineup to about 60 models by 2020 from 52 currently. That contrasts with Mueller’s effort over time to scale back groupwide product offerings from about 300 main vehicles and variants, largely at the mass-market brands.

“With the current investment program, we obviously want to enhance the brand’s strong position," while “every investment will be carefully examined," Audi Chief Financial Officer Axel Strotbek said in the statement. The division said it will postpone construction of a wind tunnel by one year as part of a cost review.

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