INGOLSTADT -- Audi will present a new plan in May to regain momentum after falling behind rivals Mercedes-Benz and BMW as the brand braces for more challenges from high spending on electric cars and new emissions tests in Europe.
Audi's return on sales last year slumped to 6 percent from 7.8 percent as Volkswagen Group's largest profit contributor increased spending on EVs and suffered production bottlenecks stemming from the new WLTP emissions testing cycle.
Global deliveries declined to 1.81 million, down 3.5 percent on 2017, with European sales plunging 14 percent. Audi targets slightly higher deliveries and revenue this year, and an operating profit margin between 7 percent and 8.5 percent.
Audi said on Thursday that 2019 will be a "transition year" as it continues its turnaround plan to save costs and increase productivity. The company anticipates financial burdens from "managing the WLTP transition, high ramp-up costs, high advance expenditure for electric mobility and the increasingly difficult macroeconomic environment."
"We are going to work hard on our cost structures," Audi Chief Financial Officer Alexander Seitz said. "But operationally we are going to face a year of cleaning up" as cost for new vehicles and stricter emission tests in Europe continue to weigh on earnings.
Audi's deliveries to dealers in Europe were hit last year because it did not have models in time to pass the new WLTP tests. "We failed the WLTP changeover as the ultimate stress test," CEO Bram Schot said on Thursday.
Audi will present a strategic realignment of the company at its annual meeting on May 23. The plan will seek to improve plant capacity utilization including bundling of platforms and vehicle architectures in production, it said.
The product portfolio will be revamped in line with demand, particularly in the upper premium segments, Audi said. By 2025, the product range in the upper mid-range and full-size segment will have grown to 15 models, it said.
To free up funds, Audi is weeding out its lineup of combustion engine cars, with the future of its aging TT model and the R8 two-seater sports cars in doubt. No decision has been made yet regarding successor models, development chief Hans-Joachim Rothenpieler said.
Schot said future sports cars might be electric.