Met with a recent demand surge, Audi is planning to expand the production of its Q5 high-end SUV models to Mexico.
Audi, part of parent company Volkswagen AG, has seen extremely good sales in 2011, selling 1.3 million cars worldwide. With its recent demand, Audi plans to become the world’s largest luxury carmaker, overtaking its Bavarian neighbor BMW to produce 2 million cars by 2020. Riding on Audi’s success, Volkswagen also recently gave an ambitious plan to become the top selling carmaker in the world by 2018 and overtake Toyota Motor Corp. and General Motors Co. to sell 10 million cars.
While moving some production to Mexico, Audi doesn’t plan to cut staff in its German production plant in Ingolstadt, which currently employs 30,000 people. For all the employees, Audi gave an employment guarantee until 2014, so there is not going to be any short-term cuts.
“We need more capacity to keep up with the rising demand,” an Audi representative said to German newspaper Focus.
“We will have additional demand for production, which we cannot cover from Ingolstadt and Neckarsulm from 2015, 2016,” Audi Chairman Rupert Stadler said in a Reuters report.
Expanding Production to Mexico
The Mexican plant is set to be operational in 2016 and has a target of producing 150,000 cars per year.
“We are talking about 150,000 units, that does not require $2 billion,” said Stadler, hinting that the production costs in Mexico are quite low compared to Germany.
The country of Mexico produced 2.6 million cars last year for various manufacturers, which makes it the eighth biggest car-manufacturing nation in the world. However, most of these cars were low-end small cars or cheap pickup trucks. With the Audi Q5—a premium SUV—Mexico will gain an uplift of its image and enter the league of serious carmakers.
“The fact that Audi is coming to build luxury vehicles is going to reposition global perceptions of Mexico as a manufacturing platform,” Armando Soto, president of Kaso y Asociados, a Mexico City-based auto industry consulting firm, said in a telephone interview to Bloomberg yesterday. “This sends a signal that Mexico can produce luxury vehicles very competitively. It’s not just production of small cars and pickups,” he added.
Last week Audi made an announcement that it is in the process of buying luxury Italian motorbike company Ducati. The price is not official, but is expected to be around 860 million euros (US$1.1 billion).
Ducati bikes are priced at the higher price range compared to other motorbike companies. For example, its new Superbike 1199 Panigale costs around 25,000 euros (US$33,000).
Last year Ducati sold 45,000 motorbikes and made 480 million euros in revenues.