Audi will trim $2.5 billion in annual costs to offset spending on new technology

Article by Andrew Christian, on October 10, 2014

Audi is seeking to cut around EUR2 billion ($2.5 billion) in costs annual to offset increasing spending on new technology, people privy with the matter told Automotive News, adding that the German luxury carmaker will limit expenditure growth in a number of areas like development, purchasing and manufacturing.

In a July letter to employees, Audi chief executive Rupert Stadler revealed "a fitness program," saying that the carmaker must brace for the surging cost of developing electric vehicles, self-driving and communications features and building new sites.

Audi, the luxury vehicle unit of Volkswagen Group, is launching 17 new or revamped models this year and has revived development of an electric version of its R8 sports car to further achieve its target of surpassing BMW in brand sales.

Audi has earmarked EUR22 billion for investments in the next five years -- 70 percent of which will be for new products and technology.

Most of the rest is will be used to expand production capacity, including new plants in Brazil and Mexico. Audi sold 1.58 million vehicles in the world in 2013, which was not enough to surpass BMW as the best-selling global luxury carmaker. BMW sold 1.66 million vehicles last year.

Audi as well as No. 3 Mercedes-Benz are aiming to dethrone BMW from the luxury sales throne by the end of the decade. All three expects higher deliveries this year, as boosted by stronger demand in North America and China.

Audi, on its part, is targeting to sell over 1.7 million cars this year, with help from new or refreshed models. Aside from higher sales, Audi is also seeking to increase its revenue and have an operating profit of between 8 percent and 10 percent of sales.

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