Manufacturing News

China surge helps Audi exceed profit goal

Volkswagen's Audi unit will overtake its mid-term margin target and is set to sell more than 1 million cars worldwide this year as demand in China for its premium cars surges.

Audi's finance chief, Axel Strotbek, urged investors not to underestimate the "economic history" being written in China, on track to become the carmaker's single largest market this year.

"All data I have, all information I have, all statistics, all consultants -- I don't see anybody who says there will be a stop, or even single-digit growth. Everything is double digit," Strotbek said.

Strotbek spoke at a media event for Audi's new A1 subcompact.

China has been a bright spot for global automakers hit badly by a sharp industry downturn. The country's move to let its currency appreciate is also expected to boost sales of foreign cars. 

Strotbek forecast earnings would grow faster than revenue this year and said the medium-term target of achieving a pretax profit margin higher than 8 percent -– up from 6.5 percent in 2009 -– was the "minimum." 

"Naturally we are aiming for more. Eight percent is the minimum target that we have given for the mid-term and 18 percent ROI (return on investment) may be conservative compared to the competition, but I think you know that we not only fulfill what we promise but exceed it," Strotbek said. 

Rivals BMW AG and Daimler AG both aim to generate a margin of 10 percent in or around 2012. Those goals are based on operating, and not pretax, profit.

"It is a sport for us to surpass our externally communicated targets," Strotbek said.

More than a million

Thanks to high sales growth in China, Audi is poised to surpass the one million mark in vehicle sales by a "not insubstantial" number, the CFO said.

In the first five months, Audi sold 88,500 units in China, up 65 percent over the year-ago period.

Worldwide, the company has sold 455,700 units in the first five months, up 22 percent from a year earlier. Based on an extrapolation of Audi's year-to-date results, the company will sell nearly 1.1 million units worldwide this year.

Strotbek knows China well having worked for three years in Beijing as executive vice president of finance for Volkswagen Group China just before his promotion to Audi CFO in September 2007.

He did not expect the yuan revaluation to have any negative impact for Audi, and said it will bring costs down for its Chinese joint venture when purchasing parts from Germany.

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