The sustainable formula for premium: progressive, electric and profitable
Talking Business – Key Facts
- The strategic corridor has been set of 9 to 11 percent.
- The financial basis is the Audi Transformation Plan with an earnings contribution of 15 billion euros by 2022 and Audi Future with approximately 6 billion euros by 2029.
- Consistently electric: investments of 12 billion euros in electric mobility by 2024; electrified cars to account for 40 percent of deliveries by 2025.
- Competitive advantages from Group-wide modular components and economies of scale.
“How Audi will be a premium leader in the future and will create sustainable value.”
This was the motto for the Audi Investor and Analyst Day on November 29 at the Audi Brand Experience Center at Munich Airport. Numerous top analysts and investors accepted the invitation to take a look into the automotive future. Nothing less was on the agenda than a system change for the existing business model.
“The logic that new models and markets lead to higher investments and unit sales was long regarded as stable and predictable – but it’s a thing of the past. We are now focusing on new growth patterns,” stated CFO in the 2019 fiscal year Alexander Seitz.“ Due to saturated markets and topics such as sustainability and digitalization, it is now no longer a question of “whether,” but of “how.”
“In order to meet the current challenges facing our industry, we are redefining Vorsprung,”
Hildegard Wortmann, Member of the Board of Management for Sales and Marketing.
“In doing so, we are consistently focusing on the wishes of our customers. Because premium is increasingly going beyond the product and stands for a progressive mindset. That’s why we are recharging the brand in line with a holistic customer experience.”
How Audi is implementing its new strategy
With its new
“Consistently Audi“ the company is tackling the challenges with confidence and with a focus on opportunities. With the vision “Unleash the beauty of sustainable mobility,” Audi is changing from an automobile manufacturer into a mobility provider, and at the same time a pioneer for CO₂-neutral mobility in the premium segment. “Customer satisfaction has top priority. To achieve the greatest possible added value, we are concentrating on measures that we can convert into price and willingness to buy,” said Head of Strategy
Jan Michel. Audi is focusing on four areas for action. These are supplemented by four maxims for activities to operationalize the strategy. They summarize how Audi intends to achieve its strategic goals.
“General conditions for corporate management are becoming increasingly complex. This is why HOW is the real unique selling point of our strategy,” emphasized Michel. It’s about a new culture, an efficient way of working and a focus on the essentials. “We question everything: Where is the customer benefit? Do we need something or can we leave it out?” And: Can we work together on this within or outside the Group?
A new strategic approach also has implications for corporate management. “We have to plan and manage our business in multiple worlds,” pointed out Dietrich Braßler, Head of Finance and Controlling. This is about the balance between the “core car business” and new business models. “In order to successfully master future challenges, we want to fundamentally change our management model and tailor it to the needs of the respective business,” he continued.
Resources will be applied where they contribute the most value. The company therefore aims to use KPIs to measure success more strictly, within the framework of regular strategy and target summits. This is how Audi intends to increase shareholder value sustainably.
Audi Transformation Plan and Audi.Zukunft
Audi’s future financial success is based on two programs: The Audi Transformation Plan (ATP) is focused on the rapidly acting aspects of the change until 2022.
Audi.Zukunft has the goal of making the company structurally fit and competitive by 2029. The ATP started successfully in 2017 and is to free up approximately 15 billion euros for future projects by 2022. Specific measures for 80 percent of that total have already been identified. The company is now also tackling structural issues with Audi.Zukunft. This agreement will result in a cumulative boost to earnings of 6 billion euros by 2029. “The course has been set for Audi to achieve an operating return on sales within the strategic target corridor of 9 to 11 percent again in the medium term,” stated CFO Alexander Seitz.
Roadmap E as a key lever
“We are committed to the Paris climate targets, Audi will be CO₂-neutral by 2050 at the latest”
“We are committed to the Paris climate targets, Audi will be CO₂-neutral by 2050 at the latest,” said Seitz. “We are accelerating our electrification with the Consistently Audi strategy. But electric mobility is not to be used as an excuse at Audi. We intend to continue to generating a premium return. Although electric vehicles still have disadvantages in terms of earnings,” Seitz emphasized the word “still.” But it won't stay that way. Customer demand especially for electric models will continue to grow. Technological leaps, economies of scale and spending discipline will also increase the profitability of electric mobility.
By 2024, the company will invest approximately 12 billion euros in its electric fleet and the related infrastructure.
The Audi Group aims to have more than 30 electrified models in its product range by 2025, more than 20 of which will be fully electric. By then, Audio wants to achieve 40 percent of its global unit sales with all-electric and hybridized automobiles.
Competitive advantages from using Group-wide modular components
In order to achieve the rapid scaling of electric mobility, Audi is working with Porsche to develop the Premium Platform Electric (PPE) for large electric cars, and is developing the Modular E-Drive Component System (MEB) together with Volkswagen. The cross-brand architectures are uncompromisingly electric and will enable high Group synergies in the future.
“One thing is clear: We are prioritizing and making courageous product decisions,” stated Daniel Kauer, Head of Product Strategy. With its electric initiative, Audi will offer new, progressive automobiles, especially in the prestigious large-sedan segment. Purchasing power and earnings contribution are in harmony here. The same applies to the electrified range of sport utility vehicles (SUVs).