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Audi CEO Schot Bullish as Transformation Plan Brings First Benefits

Date: October 8, 2019
Source: Automotive News

Audi in May outlined a strategy focused on sustainability that includes having 30 models with electrified drivetrains, of which 20 will be full-electric, by 2025. Audi has earmarked 14 billion euros ($15.4 billion) toward electric mobility, digitalization and autonomous driving and a total of 40 billion euros toward improving its standing in the ultra-competitive premium sector, where it trails Mercedes-Benz and BMW in global sales.

CEO Bram Schot is more focused on profit margins than volumes. He discussed this and more with Automotive News Europe Associate Publisher and Editor Luca Ciferri and correspondent Christiaan Hetzner.

What will be the biggest challenge that Audi faces next year?

It's a combination of two things, markets and investments. Next year will remain challenging on the markets side, including in China, but we are slightly optimistic on the outlook for the premium segment there. In general, we do not see the main markets growing, with price pressure challenging our premium business. We foresee Europe being stable, but the quality of sales has already deteriorated a little bit. We anticipate a lot of pressure in the U.S., where we would be happy to see a stable market. Therefore, if you want to improve your results and market situation, it will be even more important to improve your own performance.

What is the challenge on investments for e-mobility?

We will be investing 14 billion euros in select future-focused areas as part of our current five-year plan. That's a lot. And our total investment during the period [which runs through 2023] will be 40 billion euros. That has to be financed. With flat markets, growth won't come from higher volumes, it has to come from improving performance. Getting the right margin is the real issue.

How will you achieve this?

We are encouraged because we have seen the first positive results from our transformation plan. Our operating return on sales is about eight percent and that looks much better than our competition. If you start making your company less dependent on volume and get more out of lower costs and improved flexibility, then you can start growing your brand.

What is your biggest challenge on the investment side?

Finding the right balance on where we put our money to achieve the maximum impact. How do we split our investments in full-electric cars and plug-in hybrids? How do we tackle autonomous driving and shared mobility on the investment side? This is really challenging as all these business models are linked and we have to take into account various external factors such as infrastructure.

What is the toughest part of getting customers to consider electric vehicles?

The feedback we get from customers driving EVs every day is extremely positive. The majority of them say they are hooked on electric now. Therefore, we need to create more opportunities for them to test electric cars.

Is the recharging infrastructure still an issue in Europe?

Yes. Electric mobility has to become suitable for everyday use. That is why we offer our e-tron customers the e-tron Charging Service. They have access to more than 110,000 charging points throughout 20 European countries. At the same time, it is crucial that the overall availability of charging points has to be scaled. Only then will e-mobility spread.

ACEA Chairman Carlos Tavares says he believes Brussels is listening to automakers but it isn't hearing the message. Would you agree?

Clearly, there could be more done in some areas, but I'm not pointing fingers. We, as the automotive sector, also have to do our homework. And we are not done yet. At the same time, we can see what the Netherlands has done -- and being Dutch, I'm proud to praise my country. When you see the number of charging points in the Netherlands compared with, for example, Germany, you see that creating a charging infrastructure is fundamental.

How did the Netherlands achieve this?

Authorities wanted to get people to make a change so trades-offs where created. This shows the move to electrification can work. There is money to be made there. There is a business model. And everyone was well aware that this would only work if there was an adequate infrastructure to recharge the cars. I think that the Dutch as well as the Norwegians and other Scandinavian countries, for example, have done a very good job.

By 2025 Audi plans to have 20 full-electric and ten plug-in hybrid models. How will that affect your overall sales?

We expect to have electrified models account for 40 percent of our global sales in 2025.

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