Audi increases upfront expenditure for electric mobility; €12B by 2024

Audi AG plans an outlay of approximately €37 billion for research and development expenditure and investment in property, plant and equipment over the next five years (2020 to 2024).

The current planning reflects a significant improvement in investment and cost discipline, as well as the strong prioritization of investments in electric mobility. The manufacturer is planning an upfront expenditure of €12 billion solely for electric mobility—more than ever before.

The Audi Transformation Plan (ATP), launched two years ago, is freeing up the necessary funds. Since the start of the program, the ATP has already contributed €4 billion to earnings. Furthermore, measures taken in the context of Audi.Zukunft are to free up approximately €6 billion for future investments by 2029.

With our Consistently Audi strategy, we are accelerating our roadmap towards electrification. Our investment planning takes this into account. At around €12 billion, we will spend more than ever before on electric mobility by 2024.

—Alexander Seitz, Board of Management Member for Finance, China and Legal Affairs at Audi AG

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By 2025, the Audi Group intends to have more than 30 electrified models in its product range, 20 of which will be fully electric. Audi intends to achieve about 40% of its worldwide unit sales with all-electric and hybridized automobiles by then.

In order to achieve the rapid scaling of electric mobility, Audi is working with Porsche to develop the premium electrification architecture (PPE) for large electric cars; the Modular E Drive System (MEB) is being developed together with Volkswagen. The cross-brand architectures will enable high Group synergies to be utilized in the future.

In order to finance the high investment required to realign the business model, the company launched the Audi Transformation Plan (ATP). This earnings-improvement program is to free up a total of €15 billion for future investments by 2022. The ATP has already contributed more than €4 billion to operating profit since it was launched.

With the ATP, we have significantly improved our spending discipline and our focus on investment. The course has been set for Audi to return to an operating return on sales within the strategic target corridor of 9 to 11 percent in the medium term.

—Alexander Seitz

Measures have already been identified for 80% of the program.

Audi.Zukunft, a fundamental agreement reached on 26 November between the company’s management and the employee representatives, will also make a crucial contribution towards ensuring Audi’s long-term competitiveness. The agreement includes the market-oriented optimization of strategic production capacities at the two German plants and socially responsible workforce adjustments.

The agreement strengthens new job profiles in apprenticeships and further training and extends the employment guarantee until the end of 2029. At the same time, the Works Council and the company’s management have agreed to cut up to 9,500 jobs until 2025.

The reductions will take place along the demographic curve—in particular through employee turnover and a new, attractive early-retirement program. An equivalent percentage staff reduction will take place in management.

Nonetheless, Audi will continue to recruit in the coming years. The company plans to create up to 2,000 new expert positions in areas such as electric mobility and digitalization. Those appointments will be made on the principle of internal before external candidates.

The measures agreed upon within the framework of Audi.Zukunft are expected to have a cumulative positive impact on earnings of approximately €6 billion by 2029, which is to be available for investments in the future.

BMW Group to build future MINI E vehicles in China with Great Wall Motor

The BMW Group and Great Wall Motor have launched a new joint venture—Spotlight Automotive Limited—and are building a joint plant in China, where the BMW Group will produce future fully-electric models of its MINI brand.

The plant will have a standard capacity of up to 160,000 vehicles per year, which will require around 3,000 employees after the ramp-up phase. Both partners will together invest around €650 million (more than five billion CNY). The construction phase is planned for 2020 to 2022.

In summer 2018, the 50:50 joint venture agreement was signed in Berlin in the presence of Chinese Premier Li Keqiang and German Chancellor Angela Merkel.

As well as production, the innovative joint venture model also includes joint development of battery-electric vehicles in the world’s largest market for electromobility.

The joint venture envisages production of future electric MINI vehicles, as well as several models and brands for Great Wall Motor. Following the launch of the brand-new first-generation fully-electric MINI, which will be built at Oxford and come to market in the first quarter of 2020, this is another important step towards the MINI brand’s electrified future.

MINI Plant Oxford, which recently built the 10 millionth car since the brand’s launch in 1959, will remain the heart and home of MINI manufacturing, while the Spotlight Automotive joint venture will provide additional capacity and flexibility.

Zhangjiagang was chosen as the location of the Spotlight plant because of its solid supplier network, skilled workforce and good infrastructure. Jiangsu is also one of the leading provinces for finance, education and technology.

The BMW Group is firmly committed to continuing its successful cooperation with established sales structures and channels in China. The joint venture will not be creating an additional sales organization in China for future electric vehicles. Every joint venture partner will use their own sales channel for their specific brands.

The BMW Group is already a leading supplier of electrified vehicles. By the end of 2021, the company aims to have more than one million fully-electric vehicles and plug-in hybrids on the roads worldwide.

At that point, the BMW Group will offer five fully-electric production vehicles. Alongside the BMW i3, which saw demand increase by approximately 20% so far this year, production of the fully-electric MINI will also begin at the Oxford plant (UK) this month.

More than 78,000 customers have so far expressed an interest in the MINI ELECTRIC. In 2020, production of the fully-electric BMW iX3 will begin at the Shenyang plant (China), followed in 2021 by the BMW iNEXT, which will be built at the Dingolfing plant (Germany). The BMW i4 is also due to go into series production at the Munich plant in 2021.

By 2023, the company will already offer 25 electrified models—more than half of which will be fully electric. Flexible vehicle architectures, which allow a model to be driven fully electrically, as a plug-in hybrid or with a combustion engine, form the basis for this, as well as a highly flexible production system.