Audi’s profits rise as sales growth offsets costs

Audi reported higher second-quarter operating profit yesterday, as gains from record luxury-car sales outweighed the impact of spending on technology and foreign expansion.

Volkswagen’s flagship division, accounting for over 40% of VW group profit, is setting up production facilities in Mexico and Brazil, aiming to assemble more cars outside Germany than within its home country for the first time in 2014.

Operating profit edged up 1.5% in the quarter to €1.36bn, reflecting growth in sales of models such as the A8 high-end saloon and the Q7 three-row sport-utility-vehicle, Audi said.

First-half production costs increased 8.3% to €21.9bn ($29.31bn), while sales costs gained 5.9%, Ingolstadt-based Audi said yesterday. “Audi is continuing its qualitative expansion course despite major challenges,” finance chief Axel Strotbek said.

Audi’s investment drive, based on a five-year record 22bn-euro budget to fund model, plant and technology projects, is weighing on the carmaker’s profitability.

Audi’s operating profit margin eased to 9.9% of sales in the second quarter, from 10.1% in the first three months, within a target range of 8-10% and still comfortably ahead of rival Mercedes-Benz’s 7.9%.