Audi’s third quarter profit slips due to increased investments image

Audi, one of the key drivers of profit for the German automaker Volkswagen AG, failed to impress during the third-quarter, as profitability took a hit because of increased investment spending.

The expenditures on new factories and the development of upcoming models offset record sales of the luxury cars – Audi is churning out more than 1 billion euros on new assembly facilities in Mexico and Brazil in a bid to produce more cars outside its German home market for the first time ever in 2014. According to the carmaker, the profit as a proportion of sales fell slightly to 9.2% from 9.4% during the same period in 2013. At rival Stuttgart-based Mercedes-Benz the same figure was increased from 7.6% to 8.6% thanks to a better pricing position.

Audi, Volkswagen’s flagship division is a key source of profits, making up around 40% of the group’s total, has managed to overtake Mercedes-Benz in 2011 to become the second-largest premium automaker in the world. Both companies aim to secure the top position from BMW by the end of the decade.

Audi’s operating margin, which was 11% in 2012 and 10.1% last year might return to a smaller 8-10% range during the next four years as the company is planning to spend 22 billion euros on new models, plants and technology by 2018.

Via Reuters