Cars & Autos | Tuesday 28 May, 2019 3:00 am |

– Audi will become a provider of holistic CO2-neutral

premium mobility, with the aim of assuming a leading role among its competitors. The

manufacturer is therefore accelerating its electrification roadmap and company-wide

decarbonization. By 2025, the vehicle fleet’s CO2 footprint is to be reduced as a first

step by 30 percent over its entire lifecycle compared with 2015. In the future, return on

investment as a key financial steering parameter will also reflect the CO2 performance

of the Four Rings and is to rise to more than 21 percent through sustainable

management. The Board of Management is presenting the realignment at the 130th

Annual General Meeting in Neckarsulm and providing information on current business

developments. While Audi is mastering a challenging year 2019 with substantial

operationally adverse factors, the premium manufacturer is pressing ahead with its

transformation and aims for a significant increase in corporate value in the long term.

The Four Rings will focus strictly on customer-relevant innovations, will further

develop its business model profitably and will realize synergies within the Volkswagen

Group and in external partnerships. The guiding principle of the far-reaching

transformation is “Consistently Audi.”

“Audi offers the most attractive form of sustainable mobility: Our vision stands for a new

consistency in the strategic alignment and its implementation. We want to create the

strongest customer experiences in our industry and thus lead Audi to the forefront of change

in the premium segment,” says Bram Schot, Chairman of the Board of Management of AUDI AG. “For me, it is crucial that we become a customer-oriented company through and through.

Our key topics therefore include comprehensive connectivity, a convincing digital ecosystem

and highly automated driving with a focus on interurban long distances.”

By 2025, the Audi portfolio will already include more than 30 models with electric drive, of

which 20 will be all-electric. For the entry into the premium electric world, the company will by

then have launched at least three models based on the modular electric-drive kit (MEB) for

more compact vehicles. The first models on the PPE architecture developed together with

Porsche will be available in the upper segments at the beginning of the next decade. Audi

has raised its forecast for sales of all-electric cars and plug-in hybrids, and now expects

electrified automobiles to account for about 40 percent of worldwide unit sales by 2025.

As part of the Volkswagen Group’s consistent focus on electric mobility, the Four Rings are

developing their drive-system portfolio in strict alignment with the specific requirement

profiles of premium customers. With a high proportion of large automobile segments,

corresponding performance requirements and regular use over long distances, Audi will rely

on plug-in hybrids in addition to all-electric vehicles. Moreover, the brand is already looking

further to the future and is pressing ahead with the development of fuel-cell drive for the

Volkswagen Group.

With its company-wide sustainability roadmap, Audi has set itself the goal of successively

making the entire vehicle lifecycle CO2-neutral: from production to the use and recycling of

Audi models. By consistently reducing CO2 emissions and switching to renewable energy

sources, unavoidable emissions will be offset. With company-wide decarbonization, the CO2

footprint of the vehicle fleet is to be reduced as a first step by 30 percent by 2025 compared

with 2015. To this end, the company is pushing forward with the implementation of its own

target of making all Audi production locations worldwide CO2-neutral by 2025. Audi intends

to achieve CO2-neutrality for the entire company by 2050 at the latest. For sustainable

corporate management, the impact of vehicle projects on average CO2 emissions will in the

future be included in the return-on-investment ratio. This key performance indicator is to rise

to over 21 percent.

For its course for the future, the company has earmarked a total of approximately €40 billion

until the end of 2023, comprising investments in property, plant and equipment as well as

research and development expenditure. Of that amount, around €14 billion will be assigned

to electric mobility, digitalization and highly automated driving. In order to finance its high

upfront expenditure, Audi will systematically utilize available earnings potential, for example

by expanding its market position in the upper premium segments. Together with the

Lamborghini brand, Audi’s new top-end models already accounted for a significantly higher

proportion of the Audi Group’s revenue in the first quarter of 2019.

The new plug-in hybrid models in the Audi A6, A7 and A8 series will soon further expand the

full-size range. At its Annual General Meeting, the company is announcing the future

expansion of the A8 model family to include a new, especially luxurious and prestigious

derivative. For Audi Sport’s business with high-performance models, the company plans a

significant increase in sales volumes and earnings.

“A prerequisite for the success of our strategic realignment is that we position Audi in a

structurally efficient manner and lead it back to financial top performance. Already in 2018,

we established a clearly defined program for this in the form of the Audi Transformation

Plan,” says Alexander Seitz, Member of the Board of Management for Finance, China and

Legal Affairs. “Recent months have shown that our measures are taking effect and that we

can at least partially offset the current extraordinarily high adverse factors. We will build on

this in a highly disciplined manner, because our environment and future course will continue

to challenge us enormously.” Following the successful launch of the Transformation Plan,

Audi has increased the program’s target to a total of €15 billion between 2018 and 2022.

In recent months, the Audi Board of Management has initiated the company’s organizational

enhancement; the transformation process has begun in all divisions. The aim is to streamline

structures and processes, align them to key areas and increase the speed of implementation.

The Integrity, Compliance, Risk Management department now reports directly to the

Chairman of the Board of Management. With the establishment of an international customer

advisory committee, intended to be closely involved in the product development process,

Audi is strengthening its focus on customer-relevant offerings throughout the entire company.

Audi will increasingly accelerate innovations with high customer relevance through

strategically attractive partnerships. The Four Rings plan to significantly expand the “Audi on

demand” flexible premium mobility service in a far-reaching cooperation with mobility service

provider SIXT. As of the fourth quarter, customers in ten European countries will

successively be able to access up to 10,000 Audi cars and use them flexibly. In parallel, the

company will intensify the integration of its own retail partners into this digital business

segment. Audi on demand will thus be the umbrella brand for all mobility solutions from

short-term bookings to long-term vehicle use. Within the framework of another digital

initiative, the company is developing “myAudi” as an ecosystem for interested parties,

owners and users to become a platform open to third parties. Together with its retail

partners, Audi will start selling new cars on the Internet next month – a special edition of the

Audi TT will be available online as a pilot model.

With a view to current business developments, the Audi Group affirmed its forecast for its key

figures for 2019 at the end of the first quarter. The financial year will feature the continuation of the broadest model initiative in Audi’s history. In 2019, the company is organizing the

market launch of more than 20 models, including the redesigned A4, the world’s best-selling

Audi. In the rapidly growing SUV segment, Audi will present seven completely new SUV

variants without predecessors in 2019, such as two particularly sporty versions of the Audi

Q8, the Four Rings’ top SUV model. And with the Q3 Sportback and the e-tron Sportback,

Audi will for the first time launch the design-oriented Sportback concept in its SUV family.

While the model initiative will strengthen Audi’s future competitive position, the phase-out

and ramp-up situation for numerous models in 2019 will initially have a dampening impact. In

an increasingly challenging economic environment, the company anticipates moderate

growth in Audi deliveries until the end of the year. This will also reflect the reduction of

inventories in the sales and retail organization, which were specifically built up for the WLTP

transition. The Audi Group therefore anticipates a slight increase in revenue. In view of

managing the repercussions of the WLTP changeover and high upfront expenditure for the

future, the operating return on sales in transition year 2019 is expected to be between 7.0

and 8.5 percent, and thus still below the long-term target corridor of 9.0 to 11.0 percent. Audi

forecasts a net cash flow of €2.5 billion to €3.0 billion for 2019.

In the first quarter of 2019, deliveries of the Audi brand decreased by 3.6 percent compared

with the prior-year period to 447,247 vehicles (2018: 463,750). This resulted from the

previously very restricted availability of the model range caused by the WLTP changeover.

Mainly attributable to the new reporting structure that the Audi Group implemented in

January 2019, revenue decreased to €13,812 million (2018: €15,320 million). Without this

change in the reporting structure, revenue would have been almost at the prior-year level

thanks to the significant shift towards the top-end segments. First-quarter operating profit

amounted to €1,100 million (2018: €1,300 million) and the operating return on sales was 8.0

percent (2018: 8.5 percent). From January through March, the Audi Group generated a net

cash flow of €1,207 million (2018: €1,919 million).