Audi to shed profitability in bid to overcome rival BMW image

The Volkswagen Ag luxury division, which usually had a massive contribution at the end of each fiscal year to its parent’s balance sheet announced recently its earnings margins could again slide in 2015 as investment spending has entered overdrive in a bid to catch larger competitor BMW.

BMW, Audi and Mercedes-Benz have so far entrenched in a global war for the honor of being the world’s best selling automaker. That has angered numerous investors and both BMW and Mercedes-Benz have vowed to focus more on profitability than deliveries. On the other hand, showing the cut-throat clash at the luxury end of the auto market, Audi has forecasted it would be prepared to sacrifice financial health to meet its goal of surpassing BMW by 2020. The Ingolstadt-based carmaker has already managed to take the lead after two months of sales, though third-placed Mercedes-Benz has been slowly creeping in with a stellar strategy – they both close the gap with the rivals and lift profitability.

Audi now plans to lift its model lineup from 52 cars and sport utility vehicles to 60 by 2020 as it invests more than 1 billion euros (730 million pounds) in new plants in Mexico and Brazil. The heavy expenses have a toll on the profit though, with Audi forecasting its operating profit margin could fall within the 8-10 percent target range after sliding last year to 9.6 percent from 10.1 percent in 2013. Last year the earnings margin for Mercedes-Benz stood at 8.1 percent, with BMW yet to publish its overall results for 2014.

Via Reuters