Member of the Board of Management of AUDI AG
Finance and Legal Affairs
Speech Annual Media Press ConferenceMarch 17, 2022
– Check against delivery –
Welcome to this year’s Annual Press Conference. Against the background of the current situation in the Ukraine, the annual figures we are publishing today seem almost unimportant.
The war in the Ukraine, the suffering of the people and the images we see every day on television affect and distress me and us as a company very much. Here at Audi, we have stopped all deliveries to Russia until further notice, and we are trying at the moment to do everything in our power to help the Ukraine.
We are naturally also dealing with the consequences for our company; currently our supply chains from the Ukraine are heavily disrupted. We are, of course, trying to minimize the effects as much as possible, but right now it is too early to say what this will mean for the entire year.
The “right transition” at this point is just not possible. We are here today to talk about the past fiscal year, and at least in this respect, we have good news today.
2021 was a turbulent year for our industry and for Audi. The greatest challenge was the worldwide shortage in semiconductors. The lack of semiconductors was especially difficult during the second half of the year, with noticeable effects on our volume numbers and financial figures. Unfortunately, the coronavirus continued to affect everyday life in 2021, and Audi was no exception. In addition, there was a rapid rise in energy and commodity prices.
We responded quickly and decisively to these challenges and took active countermeasures: For example, we adapted our production to take account of semiconductor availability. We optimized use of our inventories of new vehicles to meet the high level of customer demand. We substantially improved our price position in markets. And we continued to work hard on our fixed costs. It is thanks to these measures as well that we can make a positive announcement today.
The Audi brand delivered around 1.68 million cars – almost on a par with the previous year’s volume. In the process, the course of events during the year mirrored the semiconductor supply situation, and Audi has been working closely with the Volkswagen Group since the beginning of 2021 to limit the effects of the crisis.
After the first two quarters, Audi was still on track to achieve record-breaking results. Deliveries were significantly higher compared with the prior-year period, which had been hit particularly badly by the coronavirus pandemic. However, especially during the second half of the year, our countermeasures reached their limits: While the second half of 2020 benefited from a broad recovery, in 2021 deliveries during the second half of the year dropped by around 29 percent compared with the same period of the previous year. Toward the end of the year, the situation improved slightly, with deliveries in November and December each exceeding the previous month.
Now let’s look at deliveries by region: In the United States, Audi managed to increase deliveries by 5 percent compared with the previous year. The most popular model was once again the Audi Q5, followed by the Audi Q3. With an increase of 53 percent, Audi sold more fully electric models in the United States than ever before. In Europe, we were almost on a par with the previous year. Audi recorded significant growth in France, Italy and the United Kingdom. In contrast, the market in Germany declined, in part because of a one-off effect due to the reduction in VAT in 2020.
In China – our largest single market – Audi ended the year with around 701,000 deliveries – a decrease of 3.6 percent compared with the record year of 2020. The fourth quarter in particular was marked by semiconductor shortages for locally produced vehicles. On the other hand, there was strong growth in demand for our imported vehicles. In China as well, Audi is systematically committed to electric mobility – and the Audi FAW NEV Company will play a key role here in the future. Construction is set to start on the new factory in Changchun, which will have an annual capacity of more than 150,000 electric cars.
Audi sold around 82,000 electric cars worldwide in 2021 – an increase of 58 percent. Despite the semiconductor crisis, Audi is continuing to make substantial progress toward sustainable premium mobility. With the four new models e-tron GT quattro*, RS e-tron GT*, Q4 e-tron and Q4 Sportback e-tron, Audi more than doubled its product portfolio of fully electric vehicles last year. The BEV share – in other words, fully electric vehicles as a percentage of total vehicles delivered – climbed from 3 to 5 percent.
The Audi Group generated revenue of EUR 53.1 billion, an increase of 6.2 percent despite a reduction in delivery volumes. Improved price enforcement in particular played a role in this development. The fully electric models launched in 2021 and our genuine parts business also made a significant contribution to the increase in revenue.
One important element of our new strategy “Vorsprung 2030” is ESG – that is, Environment, Social and Governance. I’ll come back to this a bit later. In the future, we will include ESG factors even more measurably and transparently in our key figures. One example is the measurement of sales according to the new EU taxonomy, which Audi voluntarily discloses. In 2021, the respective sales share of total revenue amounted to 12.8 percent.
Our operating profit reached EUR 5.5 billion – a new record and more than twice as much as the year before. Our operating return on sales amounted to 10.4 percent – following 5.1 percent in fiscal year 2020 – and thus lies clearly within our strategic target corridor.
What were the drivers behind this result? With better price enforcement, we were able to make the best possible use of the favorable market environment and the good residual value situation. At EUR 3.2 billion, this effect was by far the most important profit driver in the 2021 fiscal year. Exchange rates and commodity hedging effects particularly for aluminum, nickel and copper contributed EUR 0.8 billion to the increase in profit.
On the other hand, higher prices for the procurement of raw materials had an impact on our product costs, causing them to deteriorate by EUR 0.6 billion compared with the previous year.
The fixed costs and other item includes several effects. A significantly positive contribution was made by our continued cost discipline, for instance in the area of overhead costs. This was countered by impacts from the extension of the early retirement program as part of Audi.Zukunft. Moreover, performance-related remuneration rose in the wake of our record result.
In addition, operating profit in the previous year benefited from income of EUR 495 million from the sale of Autonomous Intelligent Driving GmbH. Furthermore, special items in connection with the diesel issue had a negative impact on our bottom line in the amount of EUR 48 million.
Overall, we had EUR 5.5 billion in operating profit and a return on sales of 10.4 percent on our books for fiscal year 2021. If we were to factor in our business in China, which is included in our financial result with more than EUR 1.1 billion, we would even have an operating margin of 12.5 percent.
The research and development ratio was 7.4 percent in the year under review and thus slightly above our strategic target corridor of 6 to 7 percent. This reflects higher upfront expenditures, especially in the areas of electrification and digitalization. A ratio of capex of 3.8 percent – at the low prior-year level – is an impressive example of our strict investment discipline, particularly in the area of structural investment.
With our investment planning for the next five years, we are accelerating the transition to becoming a provider of connected and sustainable premium mobility. Based on our current planning round, we are earmarking around EUR 18 billion for electrification and hybridization for the years 2022 through 2026. With a total investment of almost EUR 37 billion, around half of the upfront expenditure is going into these future-oriented fields.
From 2026, all new models introduced on the market by the Audi brand will be fully electric. By then we plan to expand our product portfolio to include more than 20 electric cars. A further EUR 3 billion will be spent on digitalization. In this future-oriented area, Audi benefits from the bundling of vehicle software expertise at our Volkswagen Group company CARIAD.
With our investment planning, we are underscoring our commitment to innovation and driving forward our transformation. Audi has the necessary financial basis since net cash flow likewise set a new record at EUR 7.8 billion. The rise of almost 70 percent compared with the previous year is mainly due to the increase in profit and reflects the development in working capital in the wake of the semiconductor crisis. Our continued investment discipline also had a positive effect.
2021 was a year of major challenges for Audi. We were able to conclude the fiscal year with such
strong operative performance in part due to our Ducati and Lamborghini brands. With almost 60,000 motorcycles sold worldwide, 2021 was the most successful year ever for Ducati. The delivery volume was up by almost a quarter on the previous year. Sales also reached a new record high, up 30 percent to EUR 878 million – thanks to favorable product mix and price effects. The operating result was EUR 61 million, corresponding to a return on sales of 7 percent.
2021 was also a very successful year for the Lamborghini brand: A total of 8,405 super sports cars were delivered – 13 percent more than in 2020 – the highest number ever in the company’s history. At EUR 1.9 billion, revenue was up almost 20 percent on the previous year. Lamborghini’s operating profit, which we are reporting for the first time for the fiscal year 2021, was EUR 393 million. The operating return on sales was 20.2 percent.
So, that was 2021 fiscal year. For 2022 as well, we were initially very confident thanks to our attractive products, full order books and a slightly improved semiconductor supply situation. What we could not possibly imagine was the war in the Ukraine. It is just as impossible to predict at the moment how this conflict will continue to develop as to forecast the possible geopolitical and economic upheavals associated with it – such as prices for raw materials or energy, inflation or the development of global GDP. Against this backdrop, we held intensive discussions about whether a forecast makes sense at this point in time.
At the beginning of the year – that is, before war broke out – we planned to deliver between 1.8 and 1.9 million cars from the brand group in 2022. And we expected revenue of between EUR 62 and 65 billion on that basis as well as an operating return on sales of between 9 and 11 percent.
The VW Group is working across its divisions and brands to mitigate the consequences for our company of the war in Ukraine. As soon as we can reliably estimate the economic effects of the conflict, we will update our guidance.
The Volkswagen Group has strengthened the role of the brand groups as independent operating units. The goal is to create maximum synergies between the brands without diluting their individual brand DNA. In this context, we will also increase our level of transparency and expand our communication to include selected performance indicators and strategic commitments at brand level.
From 2030, the brand group premium is striving for an operating return on sales of more than 11 percent. Until that time, the target corridor of 9 to 11 percent continues to apply. The Audi brand is pursuing the same target. Lamborghini has impressed with outstanding growth in recent years, with a level of return that is currently more than twice as high as in 2018. From 2030, a return on sales of more than 25 percent seems ambitious, but feasible. Until then Lamborghini intends to reach a return on sales of 22 to 25 percent.
Ducati has long-term potential for double-digit operating margins, and in the medium term our goal is 8 to 10 percent. Bentley has been part of the Audi Group since January 1, 2022, and the traditional British manufacturer is also pursuing ambitious performance targets. We will publish these as part of our regular reporting for the first quarter of 2022 – with full integration in our financial communications.
Audi has big plans. We are pursuing ambitious targets. For our returns. For our volumes. But above all for the restructuring of our business model: We are rigorously converting our product portfolio in all core segments to electric cars.
For me as CFO it is absolutely clear, that business success is inextricably linked with the assumption of social and ecological responsibility. I’m convinced that ESG represents, above all, an opportunity: We plan to take on even more responsibility for our employees and society and set ourselves apart from the competition with this important topic.
Audi already has net carbon-neutral vehicle production at several sites. This will apply to all plants by 2025. Using the decarbonization index or DCI, we control CO2 emissions along the entire automotive value chain – from raw material sourcing to production and all the way to vehicle operation and recycling.
By 2030, we want to reduce our DCI by 40 percent compared with the reference year 2018. Since 2021, the DCI has therefore been an integral part of target achievement within the scope of management remuneration. In 2022, further sustainability key figures will be integrated
into our remuneration systems – for instance, the share of revenue according to the EU taxonomy.
But I would also like to say: For us, ESG goes beyond just measures for reducing CO2. We have always taken a holistic view of this in the company. How is Audi advocating for human rights in the supply chain? What is our vision of a circular economy? How can we put our corporate governance on a robust footing? How are we involving our workforce in the transformation?
This is just a small selection of the important ESG questions that we take up openly and transparently in the Audi Report published today. Audi also submits to external evaluation in all these areas: In the future, we will also have our ESG performance rated by an independent rating agency.
That concludes my remarks on the financial figures.
Thank you very much.
Spokeswoman Finance and IT
Tel.: +49 841 89 982842
Fuel/electric power consumption and emissions values** of the models named above
Audi e-tron GT quattro
Electricity consumption combined in kWh/100 km (62.1 mi): 21.8–19.9 (WLTP); 19.6–18.8 (NEDC); CO2 emissions combined in g/km: 0
Audi RS e-tron GT
Electricity consumption combined in kWh/100 km (62.1 mi): 22.6–20.6 (WLTP); 20.2–19.3 (NEDC); CO2 emissions combined in g/km: 0