Audi Expects to Turn Profit Again in 2007

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New York Int’l Auto Show

NEW YORK – Audi of America Inc. will “show a modest profit for the second year in a row,” Executive Vice President Johan de Nysschen says in an interview at the New York auto show here.

That’s a far cry from the auto maker’s dire financial straits just three years ago, de Nysschen says, noting Audi’s first-quarter sales are up 18% over like-2006.

Parent auto maker Audi AG is keeping the supply of certain vehicles constrained, such as the A3 hatchback, so that profit margins won’t be eroded, de Nysschen says.

There is only a 60-day supply of A3s, he says, noting that while leasing is 52% of Audi’s overall business, no lease deals are offered on the hatchback.

“We cut off potentially half of the market for the A3 in order to earn full profit contribution on every unit,” de Nysschen says.

More than 80% of A3 buyers are new to the Audi brand and are switching from other European marques vs. domestic car brands, he says.

Audi also is limiting supply of its flagship A8 sedan to 60 days to maintain its residuals. “That model should not be freely available,” de Nysschen says, adding about 35% of Audi vehicles are custom ordered.

Audi plans to introduce its first North American diesel vehicle, the Q7 cross/utility vehicle, toward the end of 2008, with diesel versions of the Q5, A4 and A6 to follow. De Nysschen forecasts diesel vehicles will comprise 15% of Audi’s total sales by 2012.

Audi is setting a modest sales target of 150,000 units in the U.S. within the next decade. The auto maker’s deliveries totaled 90,116 units last year for a 0.5% market share, according to Ward’s data.

“We have no aspiration to equal the volumes of BMW, Mercedes or Lexus,” de Nysschen says. “Part of our brand identity is exclusivity.”

The auto maker’s lack of a North American manufacturing facility leaves it vulnerable to exchange rates, he notes.