Audi Plans $49 Billion Push in Challenge to BMW, Mercedes

(Bloomberg) -- Audi plans to invest 40 billion euros ($49 billion) over the next five years as the luxury-car brand expands its lineup and accelerates a shift into electric vehicles in a bid to regain lost ground against BMW and Mercedes-Benz.

Audi, the world’s third-largest maker of luxury vehicles, will introduce more than 20 models this year, including its first electric auto, reviving an expansion that was undermined by its role in parent Volkswagen AG’s diesel scandal. Audi set aside 387 million euros last year to cover recall costs and legal risks stemming from rigged diesel engines it developed.

To push deeper into electric cars, Audi will flank the E-Tron battery-powered SUV, which reaches dealers later this year priced starting at 80,000 euros in Germany, with an E-Tron Sportback coupe in 2019 and a four-door GT version as early as 2020. Overall, Audi plans to roll out more than 20 electrified models by 2025, including hybrid variants. More than 10 of these cars will be fully electric. The German manufacturer expects purely and partly battery-powered vehicles to eventually account for about one-third of sales.

“We want to play a leading role in the massive disruption in our industry,” Chief Executive Officer Rupert Stadler said Thursday at Audi’s annual press conference at its headquarters in Ingolstadt. Bolstered by a new efficiency plan, “we’re making Audi fit for this mission.”

To offset pressure on costs from creating battery-power and self-driving features, Audi’s so-called attack and transformation plan has a target of streamlining development processes by as much as 30 percent to generate 10 billion euros in savings by 2022. The spending on new models will lead to a “challenging” year in 2018 before “sustainable” earnings gains kick in next year, the company said.

The manufacturer’s expansion includes digital services under the MyAudi platform, which offers apps for interacting with the car. The brand is targeting a contribution of 1 billion euros from these products to its operating profit by 2025.

To generate development funds, Audi is boosting its lineup of sport-utility vehicles, the auto industry’s fastest growing segment and one of the most lucrative. The new flagship model Q8 will hit showrooms this year. Stadler said that by 2025 SUVs will account for about half of global deliveries.

To contact the reporters on this story: Chris Reiter in Ingolstadt at creiter2@bloomberg.net, Christoph Rauwald in Frankfurt at crauwald@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tom Lavell

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