Audi's Push to Overtake BMW Shifts Into High Gear

VW's super-profitable luxury brand is spending big to get bigger.

Mar 11, 2014 at 10:29AM

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The well-regarded Q5 SUV is just one of several hot models driving sales gains for Audi. Photo credit: Audi.

Volkswagen (NASDAQOTH:VLKAY) has put massive resources behind its Audi and Porsche brands in recent years. There's good reason for that: The two together account for less than 20% of VW Group's sales, but nearly two-thirds of the German auto giant's profits.

On Tuesday, Audi CEO Rupert Stadler said that the brand is shifting into a higher gear. Audi will mount an aggressive new-product push in 2014, he said -- part of an all-out effort to overtake archrival BMW (NASDAQOTH:BAMXF).

A small lead over BMW, and big investments to push forward
Technically, Audi has already overtaken BMW -- at least through the first two months of 2014. BMW led the world in luxury-vehicle sales last year, but through February, Audi has outsold it by 383 vehicles.

That's a tiny lead in context: Both brands sold a bit more than 242,000 vehicles in the first two months of 2014. But as Bloomberg pointed out on Tuesday, BMW's lead at this time of last year was only slightly bigger -- just 429 vehicles.

It's too early to say that Audi is "ahead". But it's clear from Stadler's remarks that Audi plans to lead. Stadler said that Audi will introduce 17 new or revamped models in 2014, including a new A3 family that will include several variants that emphasize fuel efficiency. 

Audi hopes to ride those new models to growth in all of its global regions, including Europe, in 2014. And there's more to come: Audi says that it plans to invest 22 billion euros in new products, technologies, and manufacturing facilities around the world between now and 2018.

But will that be enough to make Audi the global luxury-vehicle leader? Maybe not, because the competition is thinking along the same lines.

But Audi isn't the only luxury-car brand on the move
BMW has made it clear that it's making its own heavy investments for long-term growth, aiming to stay ahead of rivals like Audi -- as is Daimler's (NASDAQOTH:DDAIF) Mercedes-Benz brand.

Meanwhile, the lesson of Audi's outsized profitability has not been lost on VW's global rivals. General Motors (NYSE:GM) is making a massive effort to expand its Cadillac brand, with a series of impressive new models and a big push in China. Nissan (NASDAQOTH:NSANY) is making a similar push to elevate its Infiniti brand to the ranks of the global luxury-car elite.

Other automakers like Ford and Fiat Chrysler are hinting at plans to expand their luxury offerings as well. 

That doesn't mean that Audi's growth plans won't succeed: The brand has a commanding lead in China, where luxury-vehicle sales have boomed, and VW's considerable economies of scale to draw on.

But it does mean that the battle for leadership of this exceptionally lucrative corner of the global auto market will be a fierce one. Stay tuned. 

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John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends BMW and General Motors. It recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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