Audi’s plant expansion will test its ability to maintain quality standards

Article by Christian Andrei, on June 9, 2012

Audi has had enough of falling behind BMW (the current luxury segment leader) and is now planning to expand at a fast pace and add new plants at various locations worldwide. During the past decade, Mercedes-Benz and BMW have been expanding their production overseas while Audi kept its flagship plants in Germany.

Until three years ago, 75% of Audi’s production was done in Ingolstadt and Neckarsulm in Germany. Audi was focused mostly on raising quality and adding to its model lineup. Audi is planning that by 2017, the share of the German plants would drop to 45% as annual production is doubled to 1.9 million vehicles. Most of Audi’s production will come from its new plants in China and Mexico as well as from an expanded plant in Hungary.

Audi’s production boss Frank Dreves said that Audi has reached the limits of its capacity and so now it will have to expand, according to Bloomberg. This plan will put Audi to the test on whether it will be able to integrate new personnel and suppliers while still retaining those standards. Audi was able to reduce the gap with BMW in terms of quality and reputation but then a mistake may risk being able to increase sales by 54% to 2 million vehicles by 2020.

Christoph Stuermer, an analyst with IHS Automotive in Frankfurt, said that Audi doesn’t have any more “low-hanging fruit.” The production system in the U.S. is becoming more complicated. Audi has a significant role in helping Volkswagen with its goal to overtake General Motors Co. This is the largest automaker in the world since its margins are generating cash to fuel investment. The unit made up 44% of VW’s first-quarter operating profit even if it delivered only 5% of the vehicles in this group.

Topics: audi, plant

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