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Audi now more profitable because it is selling more expensive vehicles. Tier 1?

truecarlover submitted on 05/17/2007 Official AutoSpies Timestamp: 8:25 PM
from: www.fourtitude.com

[14] user comments | category: Spy Shots

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Audi now more profitable because it is selling more expensive vehicles. Tier 1?

Fourtitude recorded the entire presentation from the 118th Annual General Meeting. There were presentations by two executives. Audi is in great position on many fronts (Lamborghini is also mentioned at the meeting) The more profitable a company is - the more they can invest in their future. The most interesting point to me is that they noted profits increase more rapidly than sales because a higher portion of the sales are their more expensive vehicles. Despite the naysayers here - it appears that worldwide they are Tier 1. As a bonus the presentation detailed exactly how the R8 is handbuilt at the factory. Click the link to read the entire report and presentation. Here are some excerpts:

We sold 905,200 vehicles in 2006 – more than ever before. This is equivalent to a increase of 9.2 percent compared with the previous year.

When we look at Audi's progress over the past eleven years, we see that the company is on a steady upward curve – even if at times the economy in general has been experiencing difficulties. 2006 was the eleventh record-breaking year in succession.

We established new records in an amazing 41 markets in 2006! We made substantial progress particularly in the major European markets. Herr Weyler will be providing further details on that subject in a few moments.

Notching up impressive growth of 17.1 percent, the Audi Group's revenue reached a new record high of EUR 31.1 billion in the past financial year.

This is well above the rate of increase in vehicle sales.

This extremely pleasing development in revenue is attributable in particular to a further improvement in the model mix as a result of sales of higher-specification vehicles. But there are also other ratios in the Income Statement that impressively underline our financial success.
Gross profit, for example, rose to EUR 3.8 billion in the past financial year, an increase of 21.6 percent. This represents a disproportionately high growth rate compared with the development in revenue.

The rate of increase in our profit from operating activities was even higher at 43.2 percent, taking us above the EUR 2 billion mark for the first time in 2006.
Vehicle sales grew by more than 9 percent in 2006. Over the same period, revenue went up by 17 percent. Profit before tax even rose by almost 49 percent.

As you can see, there was a disproportionately sharp rise in revenue and earnings. This not only supplies evidence of sustained qualitative growth, but also provides an excellent springboard for the future development of our company.
A glance at our development by segment reveals that we achieved marked growth in terms of quality as well as quantity. The share of high-prestige, profitable models in the C and D segments (in other words A6, Audi Q7 and A8) rose from around 26 percent to over 34 percent.

One illustration of the high prestige that the Audi brand enjoys is the choice of engine: over one-third of customers opted for a 6, 8, 10 or 12-cylinder version.

The level of optional equipment ordered has also risen. Revenue from the Audi A6 has been increased by around 70 percent over the past five years, thanks to optional extras, and in the case of the Audi A8 it is actually 90 percent.
We are the world market leader in this segment with the Audi A6. This is yet further evidence of how the substance of the products and the appeal of the Audi brand have grown further.

The ten biggest markets account for about 80 percent of our sales. It is particularly satisfying to note that we are growing not only in young, expanding markets, but have also been expanding in certain mature markets in Western Europe for some years now.

China is well on the way to becoming a second home market for Audi. Last year was the first time that we sold over 80,000 vehicles there. We will furthermore continue to grow vigorously in China and extend our long-standing market lead for premium vehicles.
Our long-term aim is to be the leading premium brand in every market. Our strong image position in Germany has been confirmed by the recently published ams reader poll. Audi is right out in front for both quality and emotion.

Our products are likewise increasing their market shares in Western Europe excluding Germany. The highest growth rates in this respect were achieved in Sweden, Spain, France and Belgium.

We are also achieving impressive growth rates in Eastern Europe. The most notable of these is Russia, where we are market leader in the premium segment with growth of 60 percent.

Our objective in the USA is profitable growth. In other words, our emphasis is on profitability rather than volume. With vehicle sales reaching 90,000, Audi achieved a growth rate of 8.5 percent. We sold over 10,000 of the Audi Q7 in the USA, giving this model increasing significance in the SUV segment.

The sales figures for the first quarter of 2007 are solid proof that we are on the right track and that our growth is continuing unchecked. For example, despite a downturn in our home market of Germany following the VAT rate increase, our unit sales worldwide rose by 9.4 percent to more than 248,000 vehicles. March was in fact the best month in the entire history of the company, with sales exceeding 100,000 vehicles.

Vehicle sales in April were up 9.2 percent on last year.We were particularly pleased with the growth rates of 87 percent in Russia, to around 1,400 units, and 25 percent in the UK, taking the total to some 7,500 vehicles.

Audi published its first ever quarterly report just a few days ago. It reveals that our strategy of increasing revenue more steeply than vehicle sales succeeded in the first three months of this year. In the first quarter of 2007, this performance indicator grew by 13.4 percent to almost EUR 8.7 billion. The profit from operating activities in turn improved by 14.6 percent and thus more steeply than revenue, reaching EUR 401 million.
Our excellent accounts for 2006 and the first quarter of this year once again demonstrate how to achieve profitable growth.
It is of course not a valid approach simply to take these excellent sales, revenue and earnings figures for the first three months and multiply them by four when forecasting the full-year figures for 2007.That would be ridiculously simplistic. But one thing is for certain: we will be continuing down the path of success! The dynamic growth in our sales figures ought to be reflected in our key earnings figures this year, too. We therefore expect the latter to be at least on a par with last year's high level.

We aim for our unit sales to reach the one million barrier by the end of 2008. And we have even revised our sales target for 2015 upwards: Until now we have been forecasting unit sales of 1.4 million vehicles. Thanks to our dynamic growth and the long-term thinking behind our product portfolio, we are convinced that we will actually manage to sell 1.5 million vehicles in 2015...
...and that's also an easier figure to remember.
Read Article

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ATrip - 5/18/2007 9:52:08 AM

+1 Boost

Numbers don't lie. I hope all these people who ignorantly bash Audi read this. The US is just one piece of the auto industry as a whole. When you talk about world wide leaders Audi is up there, there is no denying it. And all you Lexus lovers who think they're each little gifts from God, how do their numbers compare worldwide?
Hopefully this article will shut some people up. Rebadge Jetta's my ass.

reply to this comment

S4cabriofoxone - 5/18/2007 11:33:59 AMView My AgentSpace

+2 Boost

bulldogz, you're just an Audi hater, plain and simple. I take what you have to say about the brand with a grain of salt. Toyota and Lexus cars look suspiciously similar, too- but you don't see me bashing Lexus cars as re-badged Toyotas!

snatch - 5/18/2007 1:33:56 PM

-3 Boost

i really like the new audis... but honestly, can we stop posting articles that relate to audi being tier 1?? who cares??? are you THAT insecure that you need to post something to try to convince people of it?? do mercedes lovers have to post these things? no - because owners KNOW that it's tier 1... and even IF audi isn't... who really cares?? they're nice cars, period.

S4cabriofoxone - 5/19/2007 12:53:57 AMView My AgentSpace

-1 Boost

Are you KIDDING? Have you noticed how many cars I've brought up in the past? I fight with myself every day about new cars I can look at! Here's a list of the latest additions:

• BMW M6

• Mercedes CLS63 AMG

• BMW M5 (I don't know if I want another sedan)

• Jaguar XKR

• Porsche 911

• Audi R8

• BMW 650i

• Audi RS5

• Mercedes CLK550/CLK63 AMG

I have two Audis, on a list of NINE cars. I was blown away by your statement- especially because I doubt I'd end up with another Audi, unless it's the R8, which I love. R8 may just be too much money, though, with a new house and an $80K+ new car for the wife next year.

truecarlover - 5/19/2007 3:22:14 PM

+2 Boost

Ummm- Mr. bulldogz - you stated "Of course, everyone then fails to mention that literally all the lux cars over there are dominated by diesel 4 bangers stripped of any true luxury features, since ya know, you don't need all that stuff". Did you actually read the article??? If you did you would notice that 1/3 of Audi's customers choose 6,8,10, or 12 cylinder engines (and yes they do make diesels that big). Also, you would notice that the profits have jumped faster than vehicles sales because they are "high content" vehicles!!! As far as the Lexus argument - just because something is #1 in America doesn't make it the best. Football (soccer here) is the #1 sport by FAR worldwide - yet is maybe #5 here. What does that mean? It means football (soccer) is recognized as the #1 sport by just about everyone else - but Americans have different tastes. Soccer still dominates the world without the help of America(try to compare the passion of the World Cup to the Super Bowl). Their has been talk of modifying the game to fit American tastes but thankfully that has been stopped by purists who say it is Americans who should change their viewpoints to appreciate soccer. Likewise I think Audi should remain Audi and let Americans get to see what it's about and maybe they will warm up to it.

AUTO_UNION - 5/18/2007 10:43:50 AM

+1 Boost

Keep it going Audi!

reply to this comment

BMW995 - 5/18/2007 11:24:15 AM

+5 Boost

I recently bought a Lexus IS over the Audi A3 with S-line pkg. A tough call. If I were younger I would have bought the A3..but a little too firm a suspension for long trips for my wife & I. If the A4 had the incredible DSG transmission I would have bought it. I'm sure the new A4 will have that, and that would have been the car for me.
The German cars just have that certain feel...

reply to this comment

Rupert - 5/18/2007 6:09:26 PMView My AgentSpace

+1 Boost

You're going to get flamed for saying "certain feel".
Sorry and all that, but you will.

S4cabriofoxone - 5/19/2007 12:55:11 AMView My AgentSpace

+1 Boost

Rupert, none of the diehard Lexus fans are coming to this article, because there is no "Lexus" in the title. So BMW995 is safe.

moto - 5/19/2007 4:28:38 AM

+4 Boost

Now, if i can interject a word that has something to do with the above article...

Audi seems to be making more profit in the last few years because:

1) they are releasing several new models, including the first midsize coupe in over a decade and the first-ever utility vehicle. not only are the new vehicles very well done, but free media attention is great!
2)The 2.0T engine has garnered enormous respect, and the updated TT has finally got some track credibility (although the Cayman/Boxster is actually a better handling car). These two design focus points -- the styling and the engineering -- represent the essence of the brand, and critical to future success.
3) warranty repairs are down 65% in the last few years -- which makes Audi currently second only to Porsche in German automotive quality. Lexus is still the brand to beat, but not by much, and not on every model.
4) PRICE. Audi is priced less than BMW, MB, or Porsche. I don't think Audi has enough reputation to try to inflate prices as other German manufacturers have. BMW last year was forced to offer more discounts at year end than any other manufacturer, because they overpriced their cars!

Audi has stiff competition, and moving further upmarket, in my opinion, will not guarantee more profit. If Audi tries to chase Lexus (which is a relatively more soft, comfort-oriented car), BMW (which is a better balanced but not better-built rwd car), MB (which is an overpriced, heavy, gizmo-luxury car), or Porsche (which is the quintissential sports car), then Audi will fail as being "second best". Audi must remain first and foremost a comfortable and versatile road car, excellent for 4-season driving. i believe most of its models are now amongst the best real-world cars in their respective classes, the question is whether Audi can sustain its momentum or if its growth is only momentary. Only time will tell...

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S4cabriofoxone - 5/19/2007 11:11:11 AMView My AgentSpace

+2 Boost

You saved me a lot of writing; good post.

I completely agree. Audi should never be Lexus or Mercedes-Benz, nor should they try to be BMW or Porsche. Audi should be their own brand- a superb combination of luxury and performance that other companies will try to become. Their recent products are too good for this not to happen; they're just on a roll.

truecarlover - 5/19/2007 3:11:32 PM

+4 Boost

Thanks for actually sticking to the article instead of getting into foolish arguments. This site would be so much better if people actually would READ and then intelligently comment on what was posted. To answer - I totally agree that Audi should remain different and honestly I think that is their strategy. It is only certain publications that try to make Audi into BMW. They should have their own character.

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