Audi Reports Significant Decline in Half-Year Earnings
Audi's financial performance for the first half of the year has revealed a stark decline, marking the third consecutive year of diminished earnings. The company's after-tax profit plummeted to EUR1.3 billion, representing a 37.5% decrease, as reported by the subsidiary of Volkswagen, which also includes brands such as Bentley and Lamborghini. This downturn is attributed to a combination of rising import tariffs in the United States, escalating costs associated with corporate restructuring, and disappointing sales figures in China.
The decline in earnings is particularly concerning, as it follows a profit of EUR4.4 billion reported in 2022. In response to these ongoing challenges, Audi has revised its revenue forecast for the current fiscal year, reducing expectations by EUR2.5 billion, setting a new revenue target between EUR65 billion and EUR70 billion. Furthermore, the expected profit margins are anticipated to be noticeably lower. While Audi acknowledges the recent agreement between the EU and the US regarding reduced tariffs, these changes have yet to be factored into the company's projections.
Financial Chief Jürgen Rittersberger indicated that the new US tariffs imposed in spring have cost the company approximately EUR600 million in the first half of the year. Unlike its competitor BMW, Audi does not operate a manufacturing facility in the United States, and the additional costs incurred due to these tariffs have not been passed on to American consumers, leading to potential pricing dilemmas as the company seeks to balance price and volume.
Another significant factor contributing to the profit decline is the financial burden of the company's restructuring efforts. In spring, Audi announced plans to cut 7,500 jobs in Germany by 2029, which has led to the establishment of financial reserves to accommodate these changes. This restructuring effort has impacted the first half's financial results by an additional EUR600 million; however, initial positive effects from the so-called future agreement have started to mitigate some of this financial strain.
Rittersberger underscored the critical nature of the ongoing transformation within the company, emphasizing the need to accelerate these changes. Audi aims to achieve annual savings exceeding EUR1 billion in the medium term.
The company's recent results illustrate the challenges it faces, especially regarding sales, which have decreased in both China and the United States. The current market conditions in these regions are proving to be difficult for numerous automotive manufacturers. In China, a fierce price competition persists, particularly in the electric vehicle segment. Audi is hopeful that its new models, including the Audi E5 electric vehicle designed specifically for the Chinese market, will help bolster sales.