Audi, a renowned player in the global automotive industry, has reported a drastic decline in its profits, echoing a troubling trend faced by multiple manufacturers. The company revealed that its after-tax profit plummeted by 33 percent, landing at 4.2 billion euros for 2024. This alarming decrease follows a pattern of profit reduction for Audi, marking the second consecutive year of significant losses. Jürgen Rittersberger, Audi's Chief Financial Officer, stated, "The tense situation is reflected in the results," indicating a clear struggle within the company as it grapples with numerous market challenges.
This downturn in profit does not solely impact the Audi brand but also affects its luxury subsidiaries, including Bentley and Lamborghini, which posted much higher operational returns compared to their parent company. Lamborghini's performance was particularly noteworthy, boasting a staggering margin of 27 percent. In contrast, Audi’s core brand only managed a modest operating return of 4.6 percent. "This brand plays in a league of its own," remarked Rittersberger, highlighting the challenges Audi faces even within its own portfolio.
The broader automotive industry is experiencing headwinds, particularly in key markets like China, which remains crucial for luxury car sales. Audi's strategies to relaunch its line-up, including models such as the new Q6 e-tron and A6 e-tron, were met with slower than expected sales. "These models will gradually reach global markets and then become effective," stated Gernot Döllner, Audi’s CEO. The expectation is that these new offerings will revitalize sales, but with increasing competition and consumer reluctance, the auto manufacturer faces an uphill battle.
In light of these financial strains, Audi recently announced a substantial restructuring plan that may lead to a reduction of up to 7,500 jobs by 2029. This strategic choice aims to remain financially viable without resorting to involuntary layoffs. Jörg Schlagbauer, the head of the General Works Council, emphasized the importance of reviewing each role, yet could not provide specifics on which positions might be affected. As part of the agreement, employee profit sharing will also see a cut, but job security has been extended until the end of 2033.
In the realm of electric vehicles, Audi originally had plans to transition solely to electric cars by 2033. However, strategies have shifted due to current market dynamics. Although Döllner maintains his belief in an electric future, he stressed the necessity for flexibility in the product line, saying, "We believe in the electric future of the automobile. However, this year we will have a trinity of combustion engines, plug-in hybrids, and electric vehicles in the market." This decision reflects the company’s need to adapt to existing market conditions and consumer preferences.
Audi's challenges are compounded by external factors such as fluctuating trade policies in the U.S. that may necessitate price increases for vehicles produced in Mexico. The current tariff policies pose additional pressures the company must navigate. With rising costs associated with electric vehicle production and increasing operational expenses, Audi's ability to rebound remains uncertain as they forge ahead into 2025.
Despite the forecasted difficulties, Audi holds aspirations for an upswing in 2025, targeting revenue growth to rise between 67.5 billion to 72.5 billion euros, as well as an improved operating return of 7 to 9 percent. Yet, Rittersberger cautioned that the road ahead is tough. "We have a hard path ahead of us; the markets remain highly competitive," he remarked, emphasizing that while growth is projected, the path to recovery will be fraught with hurdles.
The automotive landscape is undoubtedly in a state of flux, and with competitors like BMW and Mercedes-Benz also grappling with profit declines, Audi’s proactive measures become essential not only for corporate survival but also for sustaining its status in the luxury automobile sector.
