BERLIN (Reuters) -- Audi today reported higher second-quarter operating profit, 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 percent of VW group profit, is setting up production facilities in Mexico and Brazil, aiming to build more cars outside Germany than within its home country for the first time in 2014.
Operating profit edged up 1.5 percent in the quarter to 1.36 billion euros, reflecting growth in sales of models such as the A8 high-end sedan and the Q7 three-row SUV, Audi said.
First-half production costs increased 8.3 percent to 21.9 billion euros ($29.31 billion), while sales costs gained 5.9 percent, Audi said in a statement.
"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 22 billion-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 percent of sales in the second quarter, from 10.1 percent in the first three months, within a target range of 8-10 percent and still comfortably ahead of rival Mercedes-Benz's 7.9 percent.
To secure future growth, Audi is now pushing a program to review spending on all levels of its organization to boost efficiency, following similar measures announced by BMW and Mercedes.
Audi's vehicle sales grew 11 percent to 869,355 through June, the brand's best first-half volume to date, boosted by the new A3 range.
Rival BMW is due to publish second-quarter results on Aug. 5.