Audi eyes China, U.S. for growth

Audi AG on Friday reported its first-half net profit nearly doubled and said it is looking for strong growth in China and the U.S., with plans to boost sales to record levels in both countries this year.

"We want to significantly exceed the record year of 2008, with [global] deliveries of over 1,080,000 vehicles in 2010," said Audi sales chief Peter Schwarzenbauer during a conference call, although he shied away from predicting sales of 1.1 million, citing uncertainties in several markets related to sovereign debt concerns.

Audi posted a net profit of €978 million ($1.28 billion) in the first half of the year, up 46% from the €671 million posted in the same period of 2009. Revenue was up 21% at €17.57 billion from €14.53 billion in the first half of 2009. In the first half of the year, Audi's car sales rose 19% to 554,950 vehicles.

Mr. Schwarzenbauer reiterated that the premium brand of Volkswagen AG, Europe's largest auto maker by sales, plans to sell more than 200,000 cars in China this year for the first time. He noted that sales in this dynamic market could soar to 300,000 cars in 2012.

In the U.S., Audi is hoping to exceed annual sales of 100,000 cars in 2010 for the first time and, according to the sales chief, its operations there are profitable.

Audi "continues to spend less [on] incentives ... [and] demands higher lease prices for most models than its competitors," he said, which leads to better residual values.

Mr. Schwarzenbauer dismissed fears that demand for luxury cars might be hurt by a broad trend toward smaller and fuel-efficient vehicles. He said the global premium market is expected to grow to more than seven million vehicles by 2020 from around 4.1 million currently and faster than the overall car market.

Audi entered the small-car segment with the recent launch of the A1, but Mr. Schwarzenbauer noted that Audi's focus is on boosting its presence in the so-called C- and D-class segments of compact and mid-sized vehicles.

He said Audi wants to boost annual sales in these segments to 400,000 cars in 2015 from around 250,000 vehicles currently as part of Audi's target to sell 1.5 million cars. Audi Chief Executive Rupert Stadler, however, recently indicated that Audi might reach the 1.5 million threshold earlier than initially planned.

Audi, which ranks third in terms of global luxury car sales behind German peers BMW AG and Daimler AG's Mercedes-Benz brand, has been narrowing the gap to its two larger rivals in recent years, partly due to its large footprint in China. The Ingolstadt-based company, however, still lags BMW and Mercedes-Benz in terms of U.S. sales.

The luxury-car segment was battered last year as demand for new vehicles nose-dived during the economic downturn, as credit markets tightened and consumer confidence waned. But Audi and its peers staged a faster-than-expected recovery in the first half of this year.

Audi Chief Financial Officer Axel Strotbek said the auto maker wants to keep its profitability level stable in the second half of the year after an operating return on sales of 7.6% in the first six months, up from 5.7% a year earlier.

Audi's first-half net cash flow was up 36% at €1.9 billion and Mr. Strotbek said he expects "clearly positive" net cash flow in the second half of the year as well.