China demand to help Audi reach its sales target of 1 million units per year

Article by Christian Andrei, on August 25, 2010

With the surge in the demand in China for Audi's premium cars, this Volkswagen unit will surpass its mid-term margin target and is on track to achieve sales of over 1 million cars this year. Audi's finance chief, Axel Strotbek, asked investors not to underestimate the "economic history" being written in China. Strotbek's statement is understandable since China is on course to become Audi's single largest market for 2010.

As proof of this claim, Strotbek mentioned that he has looked at all the data and statistics and has talked to consultants that have all indicated that there will be a double-digit growth.

Car demand for most of the global community fell due to the effects of the economic downturn but China has been a bright spot for these international automakers. China's move to allow its currency to appreciate will definitely raise sales of foreign vehicles.

Strotbek predicts that earnings would increase quicker than revenue this year and that the medium-term target of achieving a pretax profit margin higher than 8% was the "minimum." He clarified that the company is aiming for more but that 8% is the minimum target that it has pegged for the mid-term.

He added that the 18% ROI (return on investment) is conservative compared to its rivals but he is confident that it will surpass this figure. Major competitors BMW and Mercedes-Benz both seek to come up with a margin of 10% at sometime 2012, although these are based on operating, and not pretax, profit.

The CFO said that due to bumper growth rates in China, Audi is on target to exceed one million vehicle sales by a significant number. We will likely know more on July 30, which is when Audi will reveal first-half results. Based on an extrapolation of Audi's year-to-date sales, Audi could reach sales of about 1.09 million vehicles for 2010.

Topics: audi, china, sales

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