Audi Plans $30.3 Billion in Investments to Challenge BMW

December 28, 2013 Leave a comment

Audi Plans $30.3 Billion in Investments to Challenge BMW

Volkswagen AG (VOW)’s Audi division, the world’s second-biggest maker of luxury cars, plans to spend 22 billion euros ($30.3 billion) through 2018, pushing models such as electric autos to gain the top spot in the premium segment.About 15.4 billion euros, or 70 percent of the total, will be invested to develop new models and technology, the Ingolstadt, Germany-based carmaker said today in a statement. Audi targets selling 2 million cars and sport-utility vehicles annually after achieving a goal of delivering 1.5 million autos in 2013, two years ahead of its original plan.

“We are now decisively steering toward our next milestone,” Chief Executive Officer Rupert Stadler said in the statement. “This is why we’re keeping our foot on the gas pedal regarding investments.”

The budget is equivalent to spending 4.4 billion euros a year, an increase from a previous plan that called for investing 4.3 billion euros annually on new models and expanding production capacity. The VW unit aims to overtake Bayerische Motoren Werke AG as the world’s biggest luxury-car producer by the end of the decade. Audi’s expansion is part of Volkswagen’s 84.2 billion-euro investment program to beat Toyota Motor Corp. (7203) and General Motors Co. (GM) in global sales.

BMW Expansion

BMW is seeking to fend off challenges by Audi and Mercedes-Benz with its own expansion. The Munich-based carmaker is introducing 25 models in 2013 and 2014 including 10 vehicles, such as the Rolls-Royce Wraith, that have no predecessor. BMW said in November that its spending will exceed targets this year and continue at a high rate in 2014.

Daimler AG’s Mercedes, which ranks third in the luxury segment, plans 13 all-new models by the end of the decade, while Audi is widening its SUV lineup. Stuttgart-based Daimler said today that it will invest 200 million euros in a vehicle-technology and testing center in the southern German town of Geisingen-Immendingen.

Audi plans to increase its product range to 60 models by 2020 from about 49 currently. The third generation of its TT coupe is scheduled to go on sale next year, joining newly introduced electric- and natural gas-powered variants of the A3 Sportback, the carmaker said today. Audi will also add to its SUV lineup with the subcompact Q1 in 2016.

To meet anticipated demand for its vehicles, the manufacturer is adding production in China, Brazil and Mexico, in addition to upgrading its German plants.

“With this investment program we are launching our next stage of growth,” Audi Chief Financial Officer Axel Strotbek said in the statement.

To contact the reporter on this story: Tom Lavell in Frankfurt at tlavell@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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