By on March 1, 2012

The European malaise seems to have selective impact on European automakers. Audi announced record results today. Audi reported an operating profit of €5.35 billion ($7.16 billion) in 2011, and wants to have even better results this year.

Don’t mention Audi when you talk to Mercedes managers. Audi sold 1.3 million cars last year, and now is the world’s second largest maker of premium cars, behind BMW. Mercedes-Benz was relegated to the #3 position.

Audi’s operating margin was a monstrous 12.1 percent last year. Mercedes-Benz used to be proud of their 9 percent. “These numbers turn Audi into one of the world’s most profitable car companies,” Audi CFO Axel Strotbeck told Automobilwoche [sub].

With 313.036 units sold (+37 percent,) China is Audi’s largest market, before Audi’s home market Germany (254.011 units, up 10.8 percent.) Audi chief Rupert Stadler is unimpressed by news that China might stop government purchases of foreign cars. Only 10 percent of Audi’s sales in China are government sales.


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19 Comments on “Audi Overtakes Mercedes, Rolls In Money...”

  • avatar

    If you’ve been paying attention to Audi’s trajectory over the past 10 years, this news shouldn’t come as any big surprise. Ever-improving design, engineering and marketing will do that for you.

    • 0 avatar

      Not necessarily. It was commented over a decade ago (can’t remember who, Jerry Flint?) that over the long term, Mercedes Benz and BMW are in trouble and Audi and Lexus will be successful and profitable because of economies of scale.

      Audi has VW and Lexus has Toyota to not only absorb the costs of R&D, but to also share car platforms. If you can do that, you can raise margins and still offer a competitive product.

      The tie up with Infiniti and Mercedes Benz is a response to such conditions, and I suspect we’ll eventually see the same with BMW and another car company.

      • 0 avatar

        You’re correct about Audi’s huge advantage over MB and BMW when it comes to economies of scale; I was just too lazy to type all of that! Besides, those economies of scale would do no good if the cars weren’t attractive and well-engineered to begin with.

        Exhibit A is the former GM.

      • 0 avatar

        VW, Audi, Seat, Skoda, Bentley, Lamborghini, Bugatti and soon Porsche.

      • 0 avatar

        “Audi has VW and Lexus has Toyota to not only absorb the costs of R&D, but to also share car platforms.”

        To me, that’s why they will do fine. IMHO, you don’t get nearly the same premium feel in an ES or TL that you get in a 3 Series or C class.

        I’ll use the TL vs. the C class hitting a pothole. The TL deals with in a more than acceptable manner. But, in the C Class you are like “Whooow, that was impressive.” You can tell a C Class isn’t just an ultra optioned Accord or Camry – it feels special in a way that is hard to describe.

      • 0 avatar

        How Daimler was supposed to share platforms – with Chrysler. You are joking, yes? They should buy SAAB instead. RWD SAAB – it sounds cool. Sign me up for one.

  • avatar

    As impressive as that is I think Jaguar Land Rover (JLR) will be laughing at both Mercedes and Audi. You see according to Autocar JLR are achieving profit margins of 20%. Which means their margins are (as far as Autocars are aware) the biggest in the sector. Bigger even than Porsche.

    JLR made a profit of over 1.2 billion pounds last year on (if memory serves me right) less than 300,000 units.

    Beat that!

    • 0 avatar
      Hildy Johnson

      JLR’s so far have largely limited themselves to the most profitable categories; this makes for large relative margins but small scale. As JLR expands downward, they will grow the business, but profit margins will become more normal, too.

      • 0 avatar

        There’s a few too many assumptions there for my liking. Firstly JLRs margins are better than PORSCHE who also avoid making cheaper cars. Secondly JLR have already said that they won’t go cheap like BMW because they wish to protect their margins so JLR are looking to remain prestige whilst arguably others head down Market. Ultimately that’s sensible because no one really wants to own a ‘cheap’ car

    • 0 avatar

      Define “cheap”.

      Jag is developing a 3 series fighter so please convert cheap into a dollar amount. If they plan on attacking the 328 along with the 335 they’ll definitely be looking at reduced transaction prices and margins.

    • 0 avatar

      First of all – the average JLR car sells for a whole lot more than the average Audi. With higher prices, higher margins are a whole lot easier – Audi gets an average of 13.7% even though they sell a lot of A1, A3 and A4’s, while JLR only starts above.

      Anyway, the 20% margin was a number reported only for the last quarter of 2011. As of the last reported full financial year (i.e. April 2010-March 2011) they had profit margins of ~10 percent – less than Audi is reporting now, and far less than Porsche did in 2010 (about 18% if you exclude the stock option business and just compare the car making part of the business).

      Also, JLR themselve have said that in order to keep growing and refreshing the models, they’ll have to double(!) yearly R&D expenses, which will make keeping the margins up that high “challenging”.

      • 0 avatar

        Exactly. 15% full-year EBITDA margin in 2010-2011 for JLR. But deduct depreciation to make it comparable to the operating margin, and it drops to about 11.1%.

        Definitely not Porsche margins and not even quite Audi margins. And that’s in spite of them currently not selling anything even close to the price of an A1, A3, A4 or Q5.

  • avatar

    Let’s not forget that MB is the number one manufacturer of semi trucks in the world. VW and Lexus have advantages in regards to platform sharing but MB also has a huge advantage. It also sells vehicles that aren’t subject to the design whims of fickle consumers.

    I don’t know what the average profit on a semi is but I’m reasonably sure its more than a car. That combined with much lower marketing/advertising costs, streamlined production processes and having businesses and governments as customers, not the general population, must be taken into account.

    I’ll take selling semi-trucks and other commercial vehicles over cars any day. Especially the high end exotics in VW’s portfolio.

    Mercedes might be losing this battle but they’re winning the war (and Honda is kinda in the same position–car business is somewhat slipping *but* they produce much more than cars).

    • 0 avatar

      VW is no slouch in the semi market either with Man. They are also in the marine and statinary game in a big way with their diesel tech. VW is *massive*.

      JLR has been living off of the Ford investment ever since they were bought. It’ll be coming up soon where that won’t fly anymore and they have to redesign, not just refresh the model lines. That’ll cost some serious cash.

  • avatar

    So, Audi sets record breaking profits, yet still can’t justify bringing American Audi enthusiasts the models we want…

  • avatar

    20%? Why not. Someone in this world has to part stupid people with their money. It is called redistribution of wealth.

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