Here's why Volkswagen CEO is prepping Audi as group's main challenger to Tesla

Whether Herbert Diess gets the contract extension he’s seeking from Volkswagen AG or not, the chief executive officer has positioned one division of the automaker to carry out his fixation with beating Tesla Inc. at its own game.

Audi e-tron SUV is the biggest bet from the car maker in the luxury car space.
Audi e-tron SUV is the biggest bet from the car maker in the luxury car space.

Diess has tasked Audi with key roles to develop and share software and electric-car parts across VW’s stable of 12 brands. That puts the division at the forefront of building up competencies the CEO sees as pivotal to surviving disruption by Tesla and other companies racing to bring battery-powered and autonomous vehicles to market.

Diess, 62, installed new top executives this year not only to restore Audi’s technological edge but to bolster returns with strict cost discipline. Efforts to do the same across VW have led Diess to butt heads with key stakeholders over management decisions, culminating in discussions Tuesday among supervisory board members about the CEO’s proposal for an early contract extension.

Also check these Vehicles

Find more Cars
Audi E-tron (HT Auto photo)
₹99.99 Lakhs - 1.16 Cr* Ex-showroom price
Add to compare
Check latest offers
Audi E-tron Gt (HT Auto photo)
₹ 1.80 - 2.05 Cr* *Ex-showroom price
Add to compare
Check latest offers
Audi Q8 E-tron (HT Auto photo)
₹ 1.14 - 1.26 Cr* *Ex-showroom price
Add to compare
Check latest offers
Audi E-tron Sportback (HT Auto photo)
₹ 1.18 Cr* *Ex-showroom price
Add to compare
Audi Q8 Sportback E-tron (HT Auto photo)
₹ 1.18 - 1.31 Cr* *Ex-showroom price
Add to compare
Check latest offers
Audi Rs5 (HT Auto photo)
₹ 1.04 Cr* **Ex-showroom price
Add to compare
Check latest offers

One of the shots Diess has been unable to call is who the next CFO of VW will be. Candidates he’s put forward include Audi CFO Arno Antlitz, who moved to the luxury-car division in March after clashing with powerful labor leaders in his previous job as finance chief for the main VW car brand, people familiar with the matter said last week.

Margin Potential

Volkswagen Group Chief Executive Officer Herbert Diess. (REUTERS)
Volkswagen Group Chief Executive Officer Herbert Diess. (REUTERS)

Before those tensions arose, Antlitz discussed Audi’s future in a phone interview. The division will run a newly minted Car.Software organization that will develop a common operating system for VW group brands. It also houses an engineering task force dubbed Artemis that’s looking to speed up vehicle development and narrow the technology gap with Tesla.

“Joint electric-car platforms and the group’s new digital backbone developed by Car.Software org are major levers to lift earnings," Antlitz said. “I think the margin potential we have here isn’t yet fully recognized."

The Artemis team, led by former Apple Inc. executive Alexander Hitzinger, is working on a car code-named “Landjet," an electric full-size crossover larger than Audi’s A8 sedan that will launch in 2024. The technology will complement an EV platform for premium cars Audi is developing together with Porsche. It can also be used by smaller luxury brands such as Bentley, the British marque that mapped out a strategy last month to go fully electric.

Audi can ill-afford its comeback strategy to falter. Along with Porsche and VW’s Chinese ventures, the brand is the main profit contributor to the group and a critical engineering hub. It’s spearheaded design and technical innovations, including lightweight construction, that have been adopted by VW’s mass-market nameplates. But after a rapid expansion that saw Audi temporarily outsell Daimler AG’s Mercedes-Benz, VW’s diesel-emissions scandal triggered management turmoil. A dealer dispute in China, Audi’s largest market, also jolted sales.

Recovery Mode

The division has recovered well from the dramatic industry slump induced by Covid-19. Third-quarter deliveries and revenue exceeded last year’s level, and lower fix costs helped generate 864 million euros ($1 billion) in operating profit, excluding some items. After a loss in the first half, Audi’s adjusted return on sales bounced back to 6.8% in the third quarter, compared with 7.5% a year ago.

VW group CFO Frank Witter told analysts last month Audi should return to its strategic margin corridor of between 9% and 11% return on sales in 2022. His comments followed the announcement that the industrial giant earmarked a record 73 billion euros in investments on future technology over five years. Diess aims to more than double the group’s market value to 200 billion euros.

“We think Audi will be a key driver of the re-rating story as its electrification should lead to market share gains," UBS Group AG’s Patrick Hummel said in a note. The E-Tron has become the best-selling luxury electric SUV -- ahead of Tesla’s Model X -- with 30,000 deliveries through the first three quarters of the year, and the analyst predicted a strong a strong fourth quarter is likely.

Audi is adding a more spacious version of the E-Tron as well as a GT coupe next year based on Porsche’s Taycan technology. The compact Q4 E-Tron SUV that shares underpinnings with VW’s mass-market EVs is also due to hit showrooms in 2021. Audi will update investors on its strategy at a capital markets day on Dec. 7.

First Published Date: 01 Dec 2020, 15:17 PM IST
Shopping Bag Shop Now
74% OFF
Microfiber Car Cleaning Soft Brush Ideal as Mop Duster, Washing Brush with Long Handle, Dust Cleaner Car Wash Brush with Handle, Soft Brush Scratch Free, Cleaning Dashboard Curved Design - Grey
Rs. 389 Rs. 1,499
64% OFF
Antson Portable High Power 2 in 1 Car Vacuum Cleaner | USB Rechargeable Wireless Handheld Car Vacuum Cleaner Traveling, Camping Reusable and Sustainable, Portable,Rechargeable Vacuum (2 in 1)
Rs. 699 Rs. 1,939
1% OFF
GOODAIR Clear Car Windshield Enhancer | Classic |12 Tablets
Rs. 295 Rs. 299
SHAYONAM Dent Removal Kit - Powerful Car Dent Repair Kit - Suction Cup Dent Puller Handle Lifter and Dent Repair Puller for Car Body Dent, Glass, Tiles and Mirror (Plastic)
Rs. 399

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city
Powered by: Acko Logo
Please be noted that any information provided herein above will be received by Acko General Insurance Limited (“Acko”). By mentioning the above information, you agree to provide these details and information to Acko.
By clicking "View Offers" you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.