INGOLSTADT — Audi said it will present a plan in May to regain momentum after falling behind rivals Mercedes-Benz and BMW as the brand braces for more challenges from high spending on electric cars and new emissions tests in Europe.
Audi’s return on sales last year slumped to 6 percent from 7.8 percent as Volkswagen Group’s largest profit contributor increased spending on EVs and suffered production bottlenecks stemming from the new European emissions testing cycle.
Global deliveries declined to 1.81 million, down 3.5 percent on 2017, with European sales plunging 14 percent. Audi targets slightly higher deliveries and revenue this year, and an operating profit margin between 7 percent and 8.5 percent.
Audi said on Thursday that 2019 will be a “transition year“ as it continues its turnaround plan to save costs and increase productivity. The company anticipates financial burdens from “managing the WLTP transition, high ramp-up costs, high advance expenditure for electric mobility and the increasingly difficult macroeconomic environment.”
“We are going to work hard on our cost structures,” Audi Chief Financial Officer Alexander Seitz said. “But operationally we are going to face a year of cleaning up” as cost for new vehicles and stricter emission tests in Europe continue to weigh on earnings.
Audi’s deliveries to dealers in Europe were hit last year because it didn’t have models in time to pass Europe’s new WLTP tests. “We failed the WLTP changeover as the ultimate stress test,” CEO Bram Schot said on Thursday.
Audi will present a strategic realignment of the company at its annual meeting on May 23. The plan will seek to improve plant capacity utilization including bundling of platforms and vehicle architectures in production, it said.
More high-end cars
The product portfolio will be revamped in line with demand, particularly in the upper premium segments, Audi said. By 2025, the product range in the upper mid-range and full-size segment will have grown to 15 models, it said.
Audi has widened an efficiency push to save 15 billion euros ($17 billion) by 2022 after a tumultuous year that culminated with the temporary arrest of former CEO Rupert Stadler over his role in the diesel-emissions scandal.