Unpicking Audi’s quarta horribilis

Antlitz said the Volkswagen Group was in the process of adding a second supplier and that production was due to return in the second quarter. The bottleneck hit volumes but “but much more importantly margins, specifically at the eight-cylinder model,” Antlitz said.

The problem illustrates just how much of Audi’s financial performance is concentrated around a few high-end models. In the quarter, 40% of Audi’s entire production was for 'A0/A' models, including the A1 and A3, while those categorised as 'D/E' (the largest) accounted for just 2%.

It also shows that supply constraints only boost profits when your competitors are similarly constrained (for example during the chip crisis). If your preferred Q7 is delayed but a similarly specced BMW X5 isn’t, you swap pretty quickly.

Lower sales of high-margin cars wasn’t Audi’s only difficulty in the quarter. A January strike at its Mexico plant, where it builds the Q5 SUV, also cut production, while lower residual values also dragged on profits. 

Production of Audi EVs also plummeted during the quarter, down 20% to 38,216. Interestingly, Audi in its investor slide deck attributed the lower demand to “to intensified competition” rather than overall demand reduction, suggesting that the fast rate of EV launches from BMW and Mercedes is hurting its own sales.

Until the recent launch of the delayed Q6 E-tron (a sister car to the Porsche Macan Electric), Audi offered just three EVs. 

In contrast, Audi PHEV production jumped 73% in the quarter to 28,063, perhaps to counter slower EV sales. In the first four months of this year, the petrol-electric A3 was the UK’s best-selling PHEV by far.

Audi is confident its terrible start to 2024 is a blip. The brand is guiding margins of between 8-10% for the full year as production of its cash-generating V6s and V8s return to normal.

Audi is also in the midst of implementing its cost-cutting initiative Performance Program 14 (14 standing for its longer-term margin goal). It has released few details about this except to say it  will “strengthen product line organisation, optimise the global production network and increase flexibility in production", all this “without sacrificing quality or customer-related attributes”.

Audi currently sells a staggering 18 models, excluding variants such as Avant estates or long-wheelbase versions, built in 18 plants globally. That’s excluding the Bentley, Lamborghini and Ducati operations. 

Some of those plants are run by the wider Volkswagen Group or Chinese joint-venture partners, but it does illustrate the huge complexity of Audi’s operation. More so because Audi doesn’t have the capability to build EVs alongside ICE models – something BMW has exploited to good effect through a more conservative approach to initial EV development.

Some Audi models have already ceased production, including the R8 and TT sports cars, but more are being added, including the forthcoming A6 E-tron and A6 E-tron Avant.

Others are being overhauled, including later this year the A5 and Q5, which use a new ICE platform that Audi calls Premium Platform Combustion (PPC). Further ahead is a new small EV that will sit below the Q4 E-tron.

In fact, Audi is planning to introduce 20 new models in the next two years. “We’re currently managing the biggest model initiative in Audi’s history,” Döllner told Autocar earlier this year.

Döllner has promised to refocus Audi on its long-running catchphrase Vorsprung durch Technik ('progress through technology'). “This is still the core of the brand. We have to find a new interpretation, but what remains is bringing technology that helps people,” he said.

Rivals have grabbed the initiative here in recent years. The stand-out example is BMW and Mercedes both offering level-three (hands off, eyes off) autonomous driving capability in their flagship saloons after Audi ceded them the win after first announcing then abandoning the technology for its A8 of 2018.

Audi also needs to boost its American operations. While Audi tracks BMW and Mercedes pretty closely in Europe and in China, it lags in the US. It sold just 44,000 cars there in the first quarter of 2024, down 16%, compared with 66,600 for Mercedes and 91,292 for BMW.