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The luxury arm of Volkswagen plans to accelerate its push into battery-electric vehicles with 30 BEVs expected to reach the market by 2025, company officials announced during their annual meeting on Thursday morning.
But the move is expected to ding the brand's bottom line. Volkswagen expects to spend about $9 billion on electrification by 2023 — much of that through Audi, which is taking a leading role in the corporate effort. Audi is developing a new battery-vehicle "architecture," dubbed premium platform electric, or PPE, that will be shared by other brands, including Porsche.
That is one of the key reasons why Audi's operating return on sales will run between 7 and 8.5 percent in the near term, officials said during a meeting at brand headquarters in Ingolstadt, Germany, compared with a long-term Audi goal of between 9 and 11 percent.
Audi officials said they are taking steps to trim costs, even as they hope to counter a worldwide decline in sales last year.
"The transformation plan is making a significant contribution towards safeguarding our future," Alexander Seitz, Audi's member of the board of management for finance, China, compliance and integrity, said in Ingolstadt. "Because only in this way is it possible for us to transfer enormous resources into future areas and generate the cash flow to finance electric mobility."
Like its parent, Audi is a relative latecomer to the push into battery propulsion, but it found religion after it was revealed that the German automaker had cheated on emissions tests involving the diesels that were a centerpiece of the corporate powertrain strategy. The scandal that erupted has already cost it around $30 billion in fines and settlements in the U.S. and costs continue to mount in Europe. While VW and Audi aren't abandoning diesels entirely, they are planning to steadily shift emphasis to electrified powertrains.
The Securities and Exchange Commission opened an investigation into the emissions scandal in January 2017 and told the company it may take its own action against the automaker, the company disclosed in a securities filing Thursday.
For its part, Audi is taking a multipronged approach to its plans to go electric. It has four new plug-in, hybrid or electric vehicles, or PHEVs, making their debut at the Geneva Motor Show, which runs through Sunday. But, longer term, the luxury brand is putting the emphasis on pure BEVs.
Audi has unveiled a number of all-electric concept vehicles over the last several years, including the Q4 e-tron that debuted at the Geneva show. And more are coming, starting with the Q2 L e-tron scheduled for the upcoming Shanghai auto show. Another is in the works for the big Frankfurt Motor Show in September.
The Q4 Concept will be tweaked only slightly when it goes into production late in 2020 or early 2021, Audi's global design chief Marc Lichte told reporters in Ingolstadt. He told CNBC last November, that's the same story for the e-tron GT Concept that was unveiled at the Los Angeles Auto Show, with the production model due out in 2020.
The Q2 coming to Shanghai, meanwhile, is expected to translate into a production model specifically earmarked for China that will roll into showrooms within the year.
All told, Audi has announced specific production plans for five battery-electric vehicles so far, a list that includes its first model, the e-tron that started rolling down its assembly line in Brussels last September. The SUV will be followed this year by the e-tron Sportback model.
Both of those models will offer more than 200 miles of range per charge, a figure that industry planners and analysts widely agree is the minimum consumers now expect. There may be some exceptions for so-called "city cars" that would be targeted at urban dwellers whose travel needs are limited.
Like its competitors, Audi is counting on driving down battery costs, company officials told CNBC at the Los Angeles Auto Show, though most studies anticipate that the price of battery electric vehicles won't be on par with conventionally powered models until around the middle of the coming decade.
The industry, as a whole, faces a variety of challenges increasing the appeal of battery-cars just as manufacturers begin rolling out a tidal wave of new models. The risk, warned a 2018 study by Detroit-based AlixPartners, is that there could be "a pile-up of epic proportions" coming that would lead to billions of dollars in losses across the industry.
One of the key consumer concerns is charging — both the availability of charging stations and the time it takes to replenish drained batteries.
Audi and its parent are pushing to set up public charging networks in both Europe and the U.S. Volkswagen is partnering with erstwhile rivals BMW and Daimler in Europe and, in the States, VW is funding a charging infrastructure through Electrify America. That subsidiary was created with $2 billion set aside from the automaker's diesel emissions settlement.
Many of those chargers will be Level 3, capable of delivering 800 volts of direct current at upwards of 350 kilowatts — about seven times more power than can be delivered by the first generation of DC "fast chargers." For vehicles capable of taking on that much power, that would allow them to boost range by as much as 20 miles a minute, narrowing the gap with the time it takes to fill up a gas tank.
Audi's electrification plans will rely on the use of two specially designed, skateboard-like architectures that place their batteries and motors below the floorboards. Some low-end models will rely on the MEB platform being developed primarily for the mainstream Volkswagen, Seat and Skoda brands. But most future Audi products will be based on the more advanced PPE architecture the brand is co-developing with Porsche — which has already announced plans for three production models of its own starting with the Taycan sports car going on sale later this year.
The PPE platform boasts advanced capabilities, such as torque vectoring, which allows a vehicle to power through a corner more aggressively. It also allows higher levels of horsepower and torque, a basic requirement for luxury brands such as Audi and Porsche.
The shift to battery electric vehicles is expected to put some of Audi's familiar lineup at risk, notably some performance products like the TT roadster.
"It's part of our DNA," Audi board member Hans-Joachim Rothenpieler said during a meeting with reporters in Ingolstadt, reported CNET. But while he added that product planners are "fighting for it," the question is how to make both a technical and a business case for switching it to electric drive.
Other models, such as the R8 supercar, could also be at risk if Audi were to eventually go all-electric. But company officials are hoping to replace such gas-powered products with new performance alternatives, such as the e-tron GT that was introduced in Los Angeles in November.