Audi sticks to 2013 profit target despite 17% third-quarter drop

Article by Anita Panait, on November 5, 2013

Audi reiterated its full-year 2013 profit target even after it suffered a 17-percent drop in operating profit in the third quarter of the year to EUR1.10 billion. Audi reiterated its goal to achieve its sales target of 1.5 million cars and SUVs in 2013, two years earlier than planned.

The German luxury carmaker, a unit of the Volkswagen Group, attributed the drop to higher investment costs on sites and technology. Audi is currently inducing overseas expansion, adding capacity in China, Mexico and Brazil – as part of its bid to surpass BMW as the top-selling luxury brand by 2020.

The carmaker’s second site in China will commence production at the end of 2013. It is also investing almost EUR1 billion euros ($1.35 billion) for a new facility in Mexico that will build the next generation Q5 SUV from 2016.

Audi chief financial officer Axel Strotbek said in the quarterly earnings statement that the carmaker is making high upfront expenditures and investments “now and in upcoming years” to create an “even stronger global position.”

Profit from Audi accounts for around 40 percent of VW group operating earnings and is considered vital to the parent’s target to surpass General Motors and Toyota Motor Corp. as the biggest carmaker in the world by 2018. Audi posted a 9.4-percent operating margin in the third quarter of 2013, compared to 7.3 percent return on sales for Mercedes, which posted a 23-percent surge in earnings before interest and tax (EBIT) to EUR1.2 billion. [source: automotive news - sub. required]

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