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Audi eyes 10 per cent profit growth in 2016

Growing family: Despite the diesel crisis, Audi managed to profit in 2015 and is setting higher targets for 2016, driven by new models such as the Q2, which made its debut in Geneva.

EV investment, Mexico factory, expanding global team to fuel continued Audi growth

7 Mar 2016

AFTER a challenging year overshadowed by the Volkswagen Group diesel emissions crisis, Audi is to bounce-back in 2016, with 20 new or updated models, an expanding global presence and an even greater focus on electric vehicles predicted to boost operating return by up to 10 per cent.

Despite the diesel scandal which only financially impacted the company in the case of V6 diesel engines, Audi still managed to close out 2015 with revenue of €58bn ($A86b) and an operating profit of more than €4.8bn ($A7.1b).

That figure represents an operating return on sales of 8.3 per cent, while overall global unit sales hit a new record high for the the company with 1,803,246 Audis finding homes around the globe – an increase of 3.6 per cent.

With a view to the future, the German car-maker says it will plough $A4.4b of that profit back into emerging technologies such as electrification and digital innovation, following in the tracks of vehicles such as the R8 e-tron, which introduced production electric power and the TT which pioneered the company's 'virtual cockpit'.

More vehicles are also expected to join Audi's plug-in hybrid stable that was initiated by the A3 e-tron hatchback and Q7 e-tron large SUV.

Twenty new or updated models will be welcomed in 2016, including the Q2 – the latest addition to the Q-family – and a fizzy diesel SQ7 version of the Q7 to sit alongside the smaller SQ5.

In the 2015 financial report, Audi explains that its growth strategy is partly dependent on fresh new models as well as increased support and supply from production and development infrastructure.

In Germany, 1200 new “experts” will be appointed to “strengthen core competencies” while a new generation of Audi employees will be nurtured through an apprenticeship program that will accept 10 per cent more candidates.

Loyal employees will be rewarded by a collective bargaining agreement, which shares company profits with staff who have remained with Audi for a set period of employment. Audi predicts a figure of around €5420 ($A8000) for eligible employee.

Audi anticipates a “moderate increase” in sales worldwide, but warns that the significant investment of cash for both research and development and the diesel “matter” will negatively impact company earnings in the early part of the year, but net-year profit will emerge in the strategic target corridor of 8.0 per cent to 10 per cent.

Greater global demand will in-part be met by the new factory in Mexico, but as well as building the Q5 mid-sized SUV, 3800 jobs will also be filled by residents in the San Jose Chiapa region by the time the facility opens. That figure could climb as high as 20,000 in time, taking into account all opportunities created by supporting businesses in the area.

The unfolding diesel emissions scandal that emerged last year is not over yet for the company, but compared with its parent Volkswagen Group, Audi has a more manageable task. As part of an agreement, Audi will take responsibility for impacted V6 engines, while VW has the more sizable challenge of resolving excessive nitrogen oxide emissions for four-cylinder units.

Audi categorises costs relating to the crisis as a “special item” which, in 2015 dragged the operating return on sales percentage from 8.8 down to 8.3 per cent.

“We regret what happened,” said Audi AG board of management chairman Rupert Stadler. “We will ensure full transparency and assure you that we will put things right.” The company is now more than half way through its Strategy 2020 plan, which aims to elevate the company to the number-one brand in the premium segment worldwide.

The milestone marker of 1.5 million units by the end of 2015 was convincingly eclipsed, and Audi is confident it is on target to hit the two million total by the end of 2020.

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