Audi profit driven down by Volkswagen emissions scandal

Volkswagen's luxury division Audi will miss its benchmark for profitability this year as costs for the diesel emissions scandal and possible recalls of cars fitted with Takata airbags are weighing on results.

First-half operating profit at Audi plunged 18 per cent to €2.4 billion ($2.66 billion), including €265 million of special items which pushed down the brand’s operating margin to 8 per cent from 9.8 per cent a year ago, Audi said on Friday.

The main contributor to VW group profit, Audi added €165 million of provisions in the second quarter for its emissions scandal and effects of potentially faulty Takata airbags, raising the amount of funds set aside for both issues since last year to €563 million, a spokesman said.

The Ingolstadt-based carmaker, which to date has been targeting a profit margin of between 8 and 10 per cent, on Friday said it now expected “a level slightly below this corridor”, without being more specific.

Strategic overhaul

The relapse on profitability coincides with a strategic overhaul at Audi which plans to increase spending on electric cars, digital services and autonomous driving in coming years as part of VW’s post-“dieselgate” shift of business priorities.

"To preserve our innovation and investment course, we will raise efficiency in all parts of the company," finance chief Axel Strotbek said.

On Thursday VW reported a 12 per cent drop in quarterly profit at its troubled passenger car division, a big improvement on the quarter before but highlighting the challenges it still faces to overcome the emissions scandal.

However, Audi, which slipped behind Daimler's Mercedes-Benz last year into third place among the top-selling luxury car brands, said it still counts on more than 20 all-new or redesigned models this year to beat 2015's record 1.8 million auto sales.

– (Reuters)