Audi Targets $1.2 Billion Profit Boost From Car-Data Services

(Bloomberg) -- Audi is gearing up to boost profit outside its traditional business of producing and selling upscale cars in a push against Silicon Valley’s software giants that are keen to mine potentially lucrative vehicle data.

The world’s third-largest luxury-car brand expects to generate operating profit of 1 billion euros ($1.2 billion) in 2025, the Volkswagen AG unit said Tuesday. The strategy involves tapping into the time people spend in their vehicles and the data that generates to offer services like automated parking and in-car shopping. That would amount to nearly a fifth of last year’s profit.

“We’re accelerating the global rollout of new, profitable business models in those areas we believe will be material to our industry in future,” Audi Chief Financial Officer Alexander Seitz said in a statement. “This will allow Audi to protect its high margins despite significant investments.”

The push into digital services is key for Audi as it plans to invest a record 40 billion euros in electric cars, autonomous driving and connected services by 2025. The brand is seeks to burnish an image tarnished by the diesel scandal and recover lost ground from Mercedes-Benz and BMW AG.

More Savings

To maintain profits and free up funds for battery-powered vehicles, Audi is looking to step up cost savings beyond a goal of 10 billion euros announced last year, Chief Executive Officer Rupert Stadler told reporters on a conference call.

“We want a tad more,” Stadler said, referring to the efficiency target. “In electric mobility, we want to become the number one among the premium manufacturers.”

Audi expects battery-powered and plug-in hybrid vehicles to make up one-third of deliveries in 2025, or around 800,000 vehicles, the company said, exceeding the target range of 15 percent to 25 percent of its two closest competitors. Audi will start production of its first all-electric model, the E-Tron, in about three months, adding the E-Tron Sportback variant next year. It will roll out more than 20 electric and hybrid cars by 2025, with pure-electric versions accounting for the largest chunk.

As Audi embarks on an unprecedented investment push, Volkswagen’s diesel scandal continues to haunt the manufacturer. Earlier Tuesday, Audi said it was halting deliveries of A6 and A7 sedans with V-6 diesel motors over emissions irregularities, prompting an inquiry from German authorities.

Stadler has come under fire for his handling of the crisis, including an ill-fated denial of allegations by the U.S. Environmental Protection Agency that Audi used an illegal defeat device. Still, Audi’s supervisory board renewed Stadler’s contract for another five years in 2017.

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