Audi halves profits over problems with 6 and 8-cylinder engines

Audi has had a decidedly negative start to the year. The VW Group brand lost about one billion euros in profits and more than three billion euros in group-wide sales in the first quarter compared with the same period last year, according to company data released Friday in Ingolstadt. The result was a positive 736 million euros.

Especially in the second half of the year, however, the company hopes to make up ground in order to meet its 2024 targets. “As expected, 2024 will be a year of transition for us,” said CFO Jürgen Rittersberger. “This is particularly evident in the first quarter, which was characterized, among other things, by a tense supply situation.”

This was then compounded by an internal crisis, namely the lack of an essential component for the six- and eight-cylinder engines, the most expensive ones with the best profit contribution margin, which, coming to be insufficiently available, affected their production and marketing.

Rittersberger would not say what part was missing from the V6 and V8 engines. However, it is a very complex and important component for engine efficiency. Therefore, an alternative could not be found quickly. The situation here is improving, which will be particularly evident in the third and fourth quarters.

Added to this are costs for ongoing model initiatives, a difficult market environment with increased pricing pressure in Germany and Europe, a strike in Mexico, and a valuation effect on used cars. According to Rittersberger, their declining residual value amounted to about 300 million euros.

The fact that sales fell nearly 19 percent to 13.7 billion euros, much more sharply than deliveries, which were down just under 5 percent, was only partly due to the fact that supply problems particularly affected expensive cars.

According to Rittersberger, the decline was mainly due to the fact that Audi sold a larger percentage of its cars in China. Because of joint ventures, these are not included in the revenue calculation. With 155,000 vehicles, China was again responsible for more than a third of sales. Unlike the United States and Europe, there was also an increase there.