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Audi’s Electric Ambitions Just Killed the TT and May Cull the R8

Christoph Rauwald
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Audi’s  Electric Ambitions Just Killed the TT and May Cull the R8

(Bloomberg) -- Volkswagen AG’s Audi will cease making the iconic TT coupe and replace it with a battery-powered model as the luxury brand accelerates an electric shift that may also see the next version of its flagship A8 sedan go emission-free.

Audi is also mulling an end to the $170,000 R8 sports car as Volkswagen’s biggest profit generator focuses resources on the rollout of 20 fully-electric cars by 2025. Sales of electrified vehicles, which include hybrids, are set to account for 40% of deliveries by then, Audi said Thursday at its annual shareholders meeting in Neckarsulm, Germany.

“We’re shedding old baggage,” Chief Financial Officer Alexander Seitz said. Because of tighter emissions regulations, “combustion cars are getting more expensive in the medium-term, and electric cars are getting cheaper.”

Audi is pushing to regain lost ground to rivals Mercedes-Benz and BMW AG as it struggles to emerge from the diesel-emissions scandal that shattered the manufacturer nearly four years ago. The brand’s woes culminated in the arrest of former CEO Rupert Stadler last year and a 800 million-euro ($895 million) fine. Parent VW can ill afford Audi to falter, and the group’s cash cow plans to revive profits with 15 billion euros in savings by 2022.

Iconic Design

Audi has been making the two-door TT since 1998. At the time, the model’s sloping roof and sleek design signaled a shift away from its reputation for staid sedans. Audi will replace the TT with a new electric car “in a few years,” it said.

“There will be lots of things that we won’t do any more in the future, or things that we do less,” Audi Chief Executive Officer Bram Schot said. “We focus maximum resources on our key projects.”

Audi unveiled the revamped flagship $84,000 A8 sedan in 2017 with a new-generation model due around 2025.

Separately, the carmaker said it’ll introduce short-and long-term rental options together with partner Sixt SE in Europe from the fourth quarter. Customers will be able to book an Audi from the Sixt fleet via an app for as little as on hour to as long as a year.

Shrinking Deliveries

Audi’s global deliveries have declined 5.9% since the beginning of the year. After leading China’s luxury market for decades, the brand’s sales lead narrowed substantially, putting Mercedes-Benz and BMW within striking distance in the biggest market for premium vehicles. Audi aims to double sales in its largest market in the medium term by bolstering its lineup of locally made cars to avoid import fees.

In a push to reignite momentum, Audi will launch five fully-electric and seven plug-in hybrid models within two years and will broaden the lineup to more than 30 electrified cars by 2025. But the transition will be costly. CFO Seitz warned that the brand’s earnings this year will face substantial burdens, after higher spending on electric models like the E-Tron contributed to returns last year dropping to 6% from 7.8%.

Audi targets slightly higher deliveries and revenue this year, and an operating profit margin between 7% and 8.5%. That should shift to between 9% and 11% as early as next year, helped by a sales reorganization.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Elisabeth Behrmann, Chris Reiter

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