High-level meeting – how Audi is shaping the future
Markus Duesmann
Chairman of the Board of Management and Member of the Board of Management for Product Lines of AUDI AG
A look back at the first almost 365 days: What conclusions would you draw after a year on the Board of Management?
Markus Duesmann: The past year has shown me one thing above all: Audi has enormous potential. The flexibility and adaptability of people at Audi over the course of the pandemic has genuinely impressed me. The coronavirus has not kept us from getting things done. We have continued to drive the key topics of the future so that we can deliver innovations faster to our customers. This spirit is the best tool for overcoming the challenges that lie ahead of us.
What do you see as the major challenges for the sector and how can Audi respond?
Markus Duesmann: Digitalization, electric mobility and regulation – all the established car manufacturers are currently facing the same challenges. There are no major differences here. Rather, what is crucial is that the sector will not master the transformation by clinging to old structures. The focus on software, for example, is a paradigm shift and must also change the way we develop our models in the future. Audi is adopting some smart approaches in this respect: We are no longer categorizing our model lines based on appearance, but instead based on the degree of digitalization, in other words the vehicle electrical system. That alone is a revolution. At the same time, the synergies that we are now leveraging even more intensively within the Group offer a decisive competitive edge – for example, in terms of collaboration on the development of electric platforms.
“We are no longer categorizing our model lines based on appearance, but instead based on the degree of digitalization, in other words the vehicle electrical system. That alone is a revolution.”
How do you intend to bridge the gap with new competitors in relation to the software?
Markus Duesmann: We definitely need to step up the pace. Digital features and automated driving functions are increasingly becoming a crucial factor in competition. I see enormous potential here. We have absolutely taken the right path by pooling the software competences of all brands in the Volkswagen Group. The Car.Software organization combines the best experts under one roof so that it can bring digitalization and the future operating system, among other topics, into vehicles across the Volkswagen Group. This is an ambitious plan, but it’s also unique in the industry. The Car.Software organization thus enables enormous economies of scale and, at the same time, gives us as a brand the opportunity to focus on what makes the difference for our customers: intuitive interaction with the car.
China is the largest single market for Audi. Where do you see its focal points?
Markus Duesmann: China is key for us, not just as a sales market, but also as a technological pacesetter. This market drives many innovations and is evolving rapidly. We want to use this momentum. We are therefore repositioning our business in China and developing more resources, expertise and decision-making power locally. Especially when it comes to digitalization and electrification, China’s pace is tremendous. We want to achieve one-third of our sales locally with electrified models as early as 2025. The new cooperation company is making an important contribution to this. Starting in 2024, Audi together with FAW will begin local production of electric vehicles on the Premium Platform Electric (PPE) in Changchun. China is a central pillar for the sustained success of Audi in general and a top priority for me. The strong sales figures there despite the coronavirus pandemic bolster our result in 2020. At the same time, we are concentrating not just on one market, but on three pillars: Europe, USA and China.
Starting in 2024, Audi together with FAW will begin local production of electric vehicles on the Premium Platform Electric (PPE) in Changchun. China is a central pillar for the sustained success of Audi in general and a top priority for me. The strong sales figures there despite the coronavirus pandemic bolster our result in 2020. At the same time, we are concentrating not just on one market, but on three pillars: Europe, USA and China.
What goals are you setting for the next 12 months?
We are setting ourselves ambitious goals for 2021 and want to keep on growing. And as a strong marketing and sales team, we’ll be successful at this next stage. We will focus our actions even more closely on our customers.
We’ll also continue to consistently drive the transformation of our products and our mobility services forward – with an emphasis on electrification, sustainability and digitalization. In terms of sales, online and offline offers will merge increasingly to create an integrated experience.
With the realignment of the brand and sales strategy, we have made the Four Rings fit for the future. Not only will we “be” progress, we will also reinterpret it. It is also important to me that we approach things with courage, passion, perfection and fascination. This is how we will go on shaping the premium mobility of the future together.
Arno Antlitz
Member of the Board of Management of AUDI AG, Finance and Legal Affairs, until March 31st 2021
What impact did the coronavirus pandemic have on the company’s situation?
The coronavirus is an unprecedented stress test: During the first half of the year, Audi delivered 22 percent fewer vehicles to customers. That had a massive impact. However, we responded quickly to the coronavirus pandemic and optimized our short-term expenditure, without compromising our long-term product plans or the future viability of Audi.
After what can only be described as challenging months, we were able to offset the pandemic-related losses of the first six months and return to profitability again cumulatively in the third quarter. In the fourth quarter, we were even able to surpass the previous year’s level significantly. The result for 2020 as a whole is therefore clearly positive – even if it is significantly below the previous year. One thing is certain: The crisis will continue to require great efforts on the part of the entire team. But it also signals to us that Audi is robustly positioned and economically weatherproof.
“One thing is certain: The crisis will continue to require great efforts on the part of the entire team. But it also signals to us that Audi is robustly positioned and economically weatherproof.”
― Arno Antlitz, Member of the Board of Management of AUDI AG, Finance and Legal Affairs, until March 31st, 2021
How do you intend to finance “Vorsprung durch Technik”? And which role will profitable electric mobility play in this?
Arno Antlitz: Reducing carbon emissions and protecting the climate are the most urgent tasks for our society in the long term. We want to play our part in this. At Audi, we will spend around EUR17 billion of our EUR 35 billion investment budget up to 2025 on future technologies. Almost EUR 15 billion will be allocated to electric mobility and hybridization alone. This leaves us well positioned financially for the key challenges ahead. Electric mobility is by far the most efficient way to achieve decarbonization and to meet our CO₂ fleet targets. It is thus a key element of the strategy at Audi.
We are strengthening our brand to promote growth in the high-margin segments and improve our price position. In addition, the profitability of electric models will improve significantly with new model generations: Battery costs are falling and, at the same time, we are benefiting from rising economies of scale in hardware and software. Volume plays a key role in our industry. As part of the Volkswagen Group, we are the only premium manufacturer to be able to benefit to this extent from economies of scale.
Which financial goals has Audi set for itself in the medium term?
Arno Antlitz: Audi has set itself the ambitious target return of nine to eleven percent over the next few years. We are continuing to stick to this strategic target corridor despite an economically challenging environment and the transformation of our industry. The systematic implementation of the Audi.Zukunft programs and the Audi Transformation Plan enables us to invest in future technologies such as electrification and digitalization.
An important key to our success is an emotional product portfolio. Positive signals are coming from the market, as well, and that gives me confidence. The automotive industry is expected to start growing again as of 2021, especially the premium segment. We want to benefit from this and at the same time further increase our market share. This will also be reflected in our financial figures. We want to return to pre-coronavirus levels again in 2022.
Jürgen Rittersberger
Dirk Grosse-Loheide
Member of the Board of Management of AUDI AG, Procurement and IT
You started working at Audi in April 2020. Your first months were no doubt completely different from what you expected...
Dirk Grosse-Loheide: I certainly didn’t expect things to start as they did. Overnight a majority of the team had to work remotely owing to the pandemic. Expanding the IT infrastructure on this scale was a challenge for our Audi IT. Yet we extended our digital collaboration culture massively within the shortest imaginable time.
We digitalized further important workflows, thus safeguarding core processes. This important step helps us make processes efficient and sustainable – and not just within the Audi family, but also in our everyday work with our business partners.
Procurement is a good example of the importance of this transition: In the first lockdown phase in spring, in particular, procurement, production and logistics collaborated closely to maintain the supply chains. And we succeeded in doing that. Until the lockdown in production, we didn’t lose a single car owing to a lack of parts. Achieving this became increasingly more difficult owing to the closure of logistics routes in Europe as well as stricter national regulations. However, we were able to successfully counter the crisis, primarily thanks to our highly motivated and flexible teams at Audi. And we’re going to keep this team spirit; it will help us to set course correctly for the future.
Audi wants to manufacture even more electric cars. What does the procurement strategy for raw materials and components look like for Roadmap E?
Dirk Grosse-Loheide: Two things are becoming more important with the increasing share of electrified vehicles in the portfolio. First, in the case of many parts, we have to reassess which competences we will develop in-house and which we will buy in. This will allow us to benefit from synergies across the Group, especially in relation to components for electric mobility. Second, a large proportion of emissions generated by a car throughout its life cycle is shifting to upstream production processes. As a manufacturer, this gives us decisive leverage.
Sustainability requirements are an established part of our product specifications – if suppliers fail to observe these requirements, they will get no orders from Audi. This means we can ensure that we only work with partners who share our values. Because the manufacture of electric cars is more energy-intensive than with comparable combustion models, we consistently demand that green electricity be used in cell production, for instance. As early as 2019, we established the Sustainability Rating (S-Rating) as a binding criterion for awarding contracts. In addition to environmental aspects, it also considers social criteria.
We bear large responsibility, not just for our employees, but also for our suppliers as well as everyone involved in our supply chain, and we take this responsibility seriously. It’s not just a case of looking at what our direct suppliers are doing; instead, we focus on cross-industry and cross-sector standards. Because at the end of the day, all the stakeholders benefit from greater transparency in the supply chain.
A look into the future: On which items will you spend the most money in the coming year? And why?
Dirk Grosse-Loheide: We want to help shape the transformation of the sector and are investing in two principal future-oriented fields. Software will be a key topic – both in the car and also for us within the company and in our collaboration. We have discovered just how important this is in recent months.
In addition, a majority of our funds is being invested in electrifying our powertrains. Our first all-electric models in the compact class will be rolled out in 2021 with the Audi Q4 e-tron and the Audi Q4 Sportback e-tron, and they will secure volumes. In addition, we’re starting with preparations for the first models based on the PPE. We are continuing to invest in future technologies for our electric vehicles. We have the core competence in the Volkswagen Group to produce complete battery systems in-house. I also see the trend that we’ll become involved with battery modules too in the future, once quantities justify this.
Oliver Hoffmann
Peter Kössler
Member of the Board of Management of AUDI AG, Production and Logistics, until January 31st, 2022
You are in charge of the Audi crisis team. What characterizes the Audi strategy during the coronavirus pandemic?
Peter Kössler: The virus pays no attention to borders or plant boundaries. This is why it is important to us that our actions as a company do not additionally endanger either employees or other partners, service providers and ultimately everyone at the Audi sites. Health comes first.
We responded very quickly and developed what is now a well-established framework for collaboration in the crisis team. That enabled us to make all the relevant decisions quickly and on a Group-wide basis. We deployed expert teams for every site and for each new coronavirus-related issue. These teams acted in close consultation with the departments and Works Council. Together we shut down production in March 2020 under controlled conditions and started it up again a short while later. That was a collective effort across the Audi production network globally, and I am especially proud of that. As a result, we managed to hit the ground running again with the usual quality standards and planned quantities. We quickly reached pre-coronavirus levels again in terms of production figures.
“The electric initiative requires a readjustment in production. We are focusing on flexible production operations, which will reduce complexity in the production line as well as factory costs in the long term.”
What is your strategy for achieving sustainable and competitive production?
Peter Kössler: There is a clear message in our portfolio planning: We want to introduce around 30 electrified models onto the market by 2025 and produce them predominantly in German plants. It is therefore clear that Ingolstadt and Neckarsulm will remain the backbone of our worldwide production network.
Nonetheless, the electric initiative requires a readjustment in production. We are focusing on flexible production operations, which will reduce complexity in the production line as well as factory costs in the long term. Adopting a platform-driven approach in the plants gives us major cost advantages in the Volkswagen Group. One example is the multi-brand site in Zwickau, where the Audi Q4 e-tron and its coupé-style Sportback version are manufactured on the same production line as the Volkswagen ID.4. Seat models will follow in the future. This reduces the required investment and helps ensure the capacity utilization of the plants.
Our German plants will remain pure Audi sites in the future, however, according to current planning. We will focus primarily on plug-in hybrids in Neckarsulm based on the MLB platform. In addition to the Audi e-tron GT, our first all-electric vehicle at a German site, we will produce other electric vehicles there. The Ingolstadt site will focus on producing all-electric vehicles (PPE) and the MQB platform.
In addition to efficient structures and intelligent processes, sustainable production assumes in particular the responsible use of resources. This is a very important topic, and one that is close to my heart personally. We want all of our production facilities to be net carbon-neutral by 2025. Brussels and Győr have already made a start.
What are the challenges and difficulties that you and your team will have to overcome in the next year or two?
Peter Kössler: It is our collective duty to make sure that the plants are ready for electric mobility. We are already preparing intensively for the production of electric models at the Ingolstadt site: We already have the first PPE-based vehicles in pre-series production, and in-house battery assembly will also take place at a German Audi site for the first time. We want to add additional capacities in Ingolstadt for this future technology because that will create space for the supply of high-voltage battery systems in preparation for starting PPE production. At the same time, we are working relentlessly on making all sites future-proof in the medium to long term.
Sabine Maassen
Member of the Board of Management of AUDI AG, Human Resources and Organization, until May 19th, 2022
You came to Audi in April 2020. What are the major projects and topics you are working on?
Sabine Maassen: The transformation of Audi to a digital car company is a top priority. We have to position ourselves well for this and develop the required expertise. The framework for this is provided by the general agreement Audi.Zukunft, which was concluded by the Board of Management and the employees’ representative body of AUDI AG back in fall 2019. This is a long-term roadmap enabling us to achieve efficient, future-proof corporate governance – and it focuses firmly on one thing: secure jobs for all Audi employees up to 2029.
“Every day at Audi, I experience a team that works relentlessly to shape the future of the company and that pulls together in challenging times.”
― Sabine Maassen, Member of the Board of Management of AUDI AG, Human Resources and Organization, until May 19th, 2022
We have also been working intensively over the past nine months on strategic HR planning. The question we ask ourselves at Audi is: What professional skills do we need in the future? To answer this, we compare current and future job clusters in every area, develop specific development programs and ensure that the employees acquire these qualifications in the appropriate timeframe.
How do you succeed in promoting topics such as integrity or culture change at Audi under today’s high economic pressure?
Sabine Maassen: Culture and mindset are not trivial matters that are merely “nice to have.” The culture has to be right if business is to be both sustainable and successful. This is the only way that our teams can fully contribute their knowledge and potential, and ultimately make progress tangible. Every day at Audi, I experience a team that works relentlessly to shape the future of the company and that pulls together in challenging times – because we share common values with openness, responsibility, appreciation and integrity.
We have taken concrete measures to enhance this culture even further, for instance through the mandatory Role Model Program. Board members and managers with leadership responsibility carry out measures each year in order to act as role models in the face of cultural change. We want to rethink leadership and channel our focus more strongly in the future in the direction of work organization. With the work@Audi initiative, we are moving away from traditional structures and rigid hierarchies. We need openness, honesty and respect in our exchanges and discussions. Not only is this the basis for a good feedback culture, but also for a new and agile form of collaboration at Audi. Our transformation needs openness if it is to succeed.
What are you planning for the next 12 months?
Sabine Maassen: What we have ahead of us is not a sprint, but a marathon! The plan for the future is in place. We will focus primarily on restructuring and all the other challenges posed by the transformation. I see it as my task to provide guidance and to steer the transformation in a targeted and purposeful way. We want to show that Audi offers perspectives. Ultimately, it is our ambition to be the employer of choice, both internally and externally.
Hildegard Wortmann
Member of the Board of Management of AUDI AG, Marketing and Sales
Ms. Wortmann, what was the greatest challenge for Marketing and Sales in 2020?
Hildegard Wortmann: The coronavirus pandemic was certainly our greatest challenge. However, we used the crisis as an opportunity to blaze new trails: We successfully expanded the digital business in a short period of time. We stayed in contact with our partners, customers and fans worldwide the entire time with great flexibility and new ideas. Despite social distancing rules, we have moved closer together in the process. Together we responded quickly to the restrictions and developments in the markets. Thanks to our strong crisis management, we delivered more than 1.69 million cars to our customers, shored up liquidity in the retail trade and reduced inventories. The fourth quarter of 2020 was even the most successful quarter in our history, with more than 500,000 deliveries. These challenging times have shown: We at Audi are a strong team – across the world!
How will you bring electric mobility closer to your customers?
Hildegard Wortmann: Despite the pandemic, we are sticking resolutely to our Roadmap E: We plan to introduce more than 30 electrified models onto the market by 2025, of which around 20 will be all-electric. We are thus taking the lead in the transition to electric mobility. It’s clear to us: The future of mobility is electric!
Even at this stage, customer demand shows that we have the right offer. We were able to practically double sales of our electric models in 2020 compared with the previous year. Audi was by far the strongest-selling manufacturer of battery electric vehicles among the three German premium brands. Further highly attractive electric models will be introduced onto the market this year with the Audi e-tron GT quattro, the Audi Q4 e-tron and the Audi Q4 Sportback e-tron. In addition to theproduct, however, we are continuing to focus on the ecosystem surrounding the car, for instance with the Audi e-tron Charging Service. We intend to go on generating enthusiasm for electric mobility by creating unique moments and emotional experiences for our customers.
What goals are you setting for the next 12 months?
Hildegard Wortmann: We are setting ourselves ambitious goals for 2021 and want to keep on growing. And as a strong marketing and sales team, we’ll be successful at this next stage. We will focus our actions even more closely on our customers.
We’ll also continue to consistently drive the transformation of our products and our mobility services forward – with an emphasis on electrification, sustainability and digitalization. In terms of sales, online and offline offers will merge increasingly to create an integrated experience.
With the realignment of the brand and sales strategy, we have made the Four Rings fit for the future. Not only will we “be” progress, we will also reinterpret it. It is also important to me that we approach things with courage, passion, perfection and fascination. This is how we will go on shaping the premium mobility of the future together.
