Prof. Dr. Martin Winterkorn, Chairman of the Board of Management, AUDI AG
Part 2: Current situation and outlook
Ladies and Gentlemen,
International competition in the car industry is tough and we car manufacturers have to live according to the principle of "Push them out before you get pushed out yourself."
Japanese manufacturers, for example, have announced that they are to expand significantly in the European market.
The fact that Audi is so well positioned is the result of a product and brand strategy geared to the long term. Our core competence is to build sporty, high-quality cars. This applies in equal measure to our high-volume saloon segments and our exclusive niche products.
We are supplementing our A3, A4, A6 and A8 model lines with fascinating new models. Examples include our S and RS models, Cabriolets and the new Audi Q7. Part of our strategy is to achieve higher volumes and expand significantly with the help of additional new models and model versions.
We are continually increasing the efficiency and productivity of our locations - in the areas of development and production as well as in indirect areas. Nonetheless, our plants are operating at full capacity - thanks to our increasing sales volume.
We are aiming to break through the magic sales barrier of one million vehicles as early as the end of 2008. And this will just be an intermediate goal! By the year 2015 we plan to be selling at least 1.4 million vehicles a year.
In order to achieve this, we are looking to exhaust the potential of existing markets. We have already made progress in this respect: last year we succeeded in boosting sales in Spain, France and Italy, for example, by at least 10 percent.
We likewise have a sound foundation in the difficult domestic market of Germany: last year we managed to boost our market share by 0.2 percentage points, to 7.4 percent.
The latest economic forecasts for the German economy are cautiously optimistic. The increase in VAT planned for 2007 is expected to prompt people to buy a new car this year instead. The question remains, though, as to what the state of the economy will be like in 2007.
Whatever happens, Audi will stand firmly by Germany as a production location.
45,000 highly qualified and motivated employees make our success possible. It goes without saying that we have to continue increasing productivity in order to survive in the face of fiercer competition. Our new, intelligent vehicle architecture, the "modular longitudinal platform" as we refer to it internally, is already producing clear synergy effects. And our growth strategy will enable us to maintain the size of our workforce at the current level - the ideal basis, in other words, for further increasing revenue and sales.
In its latest car index, the market research institute "Puls" even comes to the conclusion that "no other car brand will grow as strongly as Audi over the next few years."
In its course of expansion, AUDI AG is becomingly increasingly less dependent on German domestic demand. This is because we are developing more and more into a globally active company: in 1995 we still sold almost 46 percent of our vehicles in Germany. This figure was below 30 percent in 2005.
Our sales in the USA and Asia alone have increased from 13 to over 22 percent in the last ten years.
In China, Audi has been the leader in the premium segment for some time. And we are currently in the process of extending our lead further: from January to April we enjoyed an extremely high rate of growth and succeeded in more than doubling the previous year's figure by selling just under 27,000 vehicles.
Our standing in terms of reliability and customer satisfaction also confirms our strong position: Audi came out on top yet again in the J.D. Power rankings for China.
And thanks to what now amounts to around 120 exclusive Audi Centres in China, we will continue to increase our volume in this important growth market.
There is still considerable potential in the USA. The new Audi Q7, which is being launched in the USA in the next few days, will of course have an important role to play here.
Between January and April we sold just under 26,000 vehicles in the USA, which is equivalent to an increase of 5.2 percent. We are looking to sell around 90,000 vehicles in the whole of 2006. In the USA, we will therefore be strengthening our profile as a premium manufacturer and investing in the dealer network together with our sales partners. We will be focusing on 25 major cities in particular.
It is important to exhaust the potential of existing markets.
But it is equally important to open up new markets.
One good example is Russia, where we achieved an enormous growth rate last year of almost 50 percent, to more than 6,100 vehicles.
And things are continuing at this pace: we already sold more than 2,500 vehicles in Russia in the first four months of this year.
We will continue to push on with our strategy of tapping new markets this year - in Eastern Europe, India, Korea, Australia and the Golf States, for example.
But growth and high volume are not everything: we will increase the value added per vehicle in order to increase our profits. We are already on the right path here, too: to start with, we are reducing our unit labour costs by means of optimised production processes and flexible working hours. At the same time, we are offering our customers numerous attractive optional extras.
For Audi, the trend towards vehicle customisation is an important means of increasing the profit generated per vehicle. More and more often we are selling exclusively equipped cars that cost more than 200,000 euros.
The increasing proportion of optional equipment is closely related to our brand's high prestige. Not only that, but numerous surveys provide confirmation of Audi's outstanding image.
For example, Audi performed extremely well again in the readers' poll to find "The best cars", which was published in the German magazine "auto motor und sport" in February.
And once again it was the most successful brand - just like last year. More than 100,000 readers took part in the German poll alone.
As well as the A3 and the A6, the A8 was also awarded the title of "best car" again. The A8 has now topped the luxury class four times in a row.
But these awards were by no means the only ones that we collected in the first few months of this year.
The readers' poll of the trade journal "AUTO BILD alles allrad", for example, saw two Audi models winning through against the competition to claim the title "four-wheel drive car of the year 2006". These were the Audi Q7 in the "luxury-class off-roader and SUV" and the Audi A8 quattro in the "luxury-class four-wheel-drive passenger car" category. The quattro versions of the A3, A4 and A6 also made it on to the podium in their respective classes.
Audi achieved a quadruple success in the 2006 fleet awards presented by the German magazine "Autoflotte". The models Audi A3, Audi A4, Audi A6 and Audi A8 all finished top of their respective categories.
Allow me to single out just two other prizes: AUDI AG was presented with the "Best of European Business Award" as one of the nine most competitive companies in Europe. This renowned prize is awarded jointly by the management consultancy firm Roland Berger and the Financial Times.
And our Toolmaking Division in Ingolstadt also received the recognition it deserves in the form of the "Bavarian Quality Award". The Bavarian Economics Minister Erwin Huber handed over the prize in the category "Corporate Quality in Industry", for outstanding quality management in toolmaking.
The high quality of our vehicles is an important basis for Audi's success. We are therefore working intensively on further increasing our quality.
The latest ADAC breakdown statistics, for example, in which we performed extremely well again, confirm that we are on the right track.
As in previous years, the A2 and A6 both came first in their categories, and the A3 and A4 likewise finished in the first few places.
Ladies and Gentlemen,
Our long-term goal is to become the world's most successful premium brand.
The latest figures speak in favour of the fact that we are getting ever closer to achieving this goal.
Vehicle sales in the period from January through April 2006 were up 12.1 percent on the year before to almost 304,000 units. This means that we have just had the best four months in our company history.
Sales of the Audi A8, for example, were up by 19.1 percent in the first four months of this year!
And in the same period, our A6 even became the world market leader in the premium C-segment. Sales of the A6 between January and April were up by 42 percent to around 80,000 vehicles.
What's even more gratifying to note is that the rise in revenue is disproportionately high compared with sales. We therefore expect the key financial performance indicators including profit to be at least as good this year as last year. We are optimistic that we will achieve a return on investment of at least 10 percent this year. Our goal is to achieve a rate of return of six percent by 2008, and, once again, we are extremely confident of reaching this target.
So the year has got off to a very good start for Audi. We will continue to keep up this pace and expect to achieve new record figures again in 2006. Our goal is to sell around six percent or up to 50,000 more cars this year than in 2005.
The sportiest member of the Audi brand group, Lamborghini, is really taking off again. It is already apparent that we will clearly surpass last year's sales record this year, with sales of more than 1,800 cars expected.
The annual production of the Lamborghini Gallardo Spyder for 2006, for example, is already sold old.
The 2,000th Murciélago was built in the first quarter of 2006, while the 3,000th Gallardo left the production line in Sant'Agata back in November 2005.
The new Murciélago LP 640 super sports car was presented at the Geneva Motor Show in March 2006, with plans to produce 1,600 of this model by 2010.
The number of dealers has risen from 65 to 85. New dealerships in growth markets such as Russia, China and Singapore deserve a special mention.
Ladies and Gentlemen,
There's also news of success at SEAT, a brand that is undoubtedly enjoying an upward trend again! On the one hand, an extensive reorganisation programme is providing the necessary stability. At the same time, the company's sales figures are developing at an outstanding rate. With an increase of around 20 percent in the first quarter of 2006 compared with the previous year, the brand expanded in Germany at a much sharper rate than the overall market (6.4 percent). Over 6,000 new SEAT cars were registered in Germany in March 2006, 23 percent more than in the same month last year. The Ibiza and Leon model lines are selling particularly well. And one thing is certain: we will be adding further attractive models to this product range. Lower entry-level engine versions will also attract new customers to the brand.
But let's get back to the Audi brand.
In order to achieve our ambitious growth targets, we launched a model drive last year which is set to continue for quite some time.
One of the highlights at the Detroit Motor Show was the new S6 with V10 FSI engine which delivers 435 horsepower. We presented this luxury sports car to the press in Neckarsulm at the end of March - and received an extremely positive response. Its market launch is scheduled for June.
Another highlight in Detroit was the Roadjet Concept study. This interesting vehicle offers its occupants a clear bonus in terms of space and comfort. And it presents another electronic innovation: Audi drive select allows the driver to pre-select various vehicle characteristics - from comfortable to sporty. This not only changes the suspension and damping, but also engine characteristic, transmission and steering.
The Audi Q7 also features a number of innovations - in the field of driver assistance systems, for example: adaptive cruise control is a radar-assisted cruise control system with automatic distance control and obstacle warning.
Audi side assist is specially designed for lane-changing and helps the driver by monitoring the blind spot.
Incidentally, we have just been awarded the "Innovation of the Future" award for this new concept by Germany's biggest consumer magazine "Guter Rat".
And finally, the Audi parking system advanced uses a rearview camera to make sure the driver can manoeuvre safely into any parking space.
The Audi Q7 has been in European dealers' showrooms since March 10. The response from our customers has been overwhelming. Up to yesterday we had received over 30,000 definite orders - an outstanding figure! We have increased production from 200 to 300 units a day to make sure that we are able to deliver all orders as soon as possible. We plan to produce more than 60,000 of the Audi Q7 in 2006 and to deliver around 50,000 of this model to customers.
The proportion of diesel models ordered has been very dominant so far. But this about to change because orders have also been coming in from the USA and Asian markets since May.
So what other models will help to make sure that Audi achieves new record figures again this year?
The Avant and Cabriolet versions of the RS 4 saloon presented last year celebrated their world premiere at this year's Geneva Motor Show.
We will be presenting these power packs, with their 420 bhp high-revving engine, to the press in Rome in the next few days. The market launch will follow in the next few weeks.
We also presented the successor to the allroad quattro in Geneva. The new Audi A6 allroad quattro with quattro drive as standard puts up an even more dynamic performance - both on the motorway and across open terrain. The driving event for the press took place recently in Merano. This model will be launched in early June.
The world premiere of the new Audi TT Coupé at the start of April was particularly spectacular.
As part of the initiative "Germany - Land of Ideas", we started by unveiling a giant car sculpture in front of the Brandenburg Gate, watched by numerous prominent guests. Directly afterwards, the new version of our design icon drove through the Brandenburg Gate. We now wish to show you a short film to give you a sense of what the atmosphere was like at this event.
As you will have seen for yourselves, the politicians Franz Müntefering, Edmund Stoiber and Klaus Wowereit, the footballers Ronaldo, Zinedine Zidane and Bastian Schweinsteiger, the legendary racing driver Jacky Ickx and many other celebrities had the honour of attending our TT presentation. And the response was extremely positive. The new model will continue the great success of the TT. The new TT will be powered by sporty engines, combined throughout with DSG. It will be launched in September.
I am particularly looking forward to our R8 sports car, which you can see pictured here as a study. This will be launched with a 420 bhp 4.2-litre engine, with other attractive engine versions to follow at a later date. The start of production will be in Neckarsulm at the end of 2006; the market launch will follow in 2007. I'm afraid I'm unable to show you any pictures yet of the following models that we will be launching slightly later on:
The S3 will be a three-door model with a sporty engine. It will be in dealers' showrooms in the second half of 2006.
The A5 Coupé will mark the start of a new technical generation.
Like the R8, the A5 will open up a new segment for Audi. We will be building the A5 Coupé here in Ingolstadt and launching it in the first half of 2007.
To conclude, I would like to say a word about motor racing.
The new Audi R10 racing car has already attracted considerable interest. This car is fitted with a high-performance 12-cylinder diesel engine and is designed to underline our expertise in the field of diesel technology, especially in the USA. It came through its baptism of fire at the 12 Hours of Sebring on March 18 with flying colours to take the chequered flag first.
We are, of course, hoping that this revolutionary vehicle concept will also take us to victory at Le Mans next month.
With Audi and Mercedes, two of the leading premium manufacturers are competing against each other in this season's DTM competition.
This is a repeat of the duel between the legendary Silver Arrow models of Auto Union and Mercedes-Benz that captivated spectators 70 years ago.
Around 100,000 spectators were treated to exciting races and a strong performance by the Audi team at Hockenheim and the Lausitzring. The next race is at Oschersleben on Sunday.
Ladies and Gentlemen,
Allow me to summarise:
- In 2005 we posted record figures for vehicle sales, production, revenue and profit.
- With our renewed and expanded product range, we are laying the foundations for even greater successes in existing and new markets.
- We are systematically continuing our model drive and expect 2006 to be another record year for Audi.
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Our success wouldn't be possible without the enthusiasm of our employees. On behalf of the Board of Management of AUDI AG, I would therefore like to thank all our employees worldwide for their hard work. In our company agreement "Audi's Future" we have decided to introduce an additional performance-related bonus for employees when the operating result reaches a certain level. If we look at the past financial year, we see that the requirement for this extended profit share for employees has been fulfilled. This means that we will be giving our employees a greater share in our company's profits than was previously the case.
We would also like to thank our customers most sincerely for their loyalty. And I would like to thank you, Ladies and Gentlemen, for your attention.
) would buy the R8 knowing that it is at least as fast (fatser...) than the competing Lambo car
.
) is telling me that R8 will be truly great car.
