Carmaker plans to boost profit through luxury brands
San Francisco, CA -- (SBWIRE) -- 10/01/2012 -- Volkswagen AG is hoping its purchase of Porsche will help in the competition with rival carmakers General Motors and Toyota.
Before the Porsche deal concluded in August, VW already had luxury vehicle brands Audi, Bentley, Bugatti and Lamborghini. VW expects the high-end vehicles will increase its profit margin and provide a hedge against economic slowdowns.
VW is aiming to surpass the sales and profit of GM and Toyota by 2018, and the luxury segment will play key role. VW sells 1 million more high-end vehicles than its two rivals each year. The goal of the luxury expansion is to support investing $81.2 billion to develop vehicles and upgrade factories.
“The financial results show that the strategy of producing exceptional cars was right,” said Martin Winterkorn, CEO of VW.
Luxury vehicles typically suffer less from economic downturns than more popular models.
“The high-end segment usually has a stabilizing effect on profits,” Frankfurt-based DZ Bank analyst Michael Punzet said.
The profit margins for VW’s luxury makers are expected to grow to almost 13% from 11.4%. More popular makers such as Seat, Skoda and VW earn a margin of 4.2%. The operating margin for Toyota in the first quarter was 6.4%, and for GM, 4.8%, according to Bloomberg.
VW is expecting a fight from its competitors. Toyota will have nine new or revamped light truck and Lexus vehicles this year, and GM is aiming to sell twice as many Cadillacs as it did in 2010 in the United States.
Porsche has plans to reveal a four-wheel drive model of the 911 and a wagon version of the Panamera coupe. Its 918 Spyder, a hybrid supercar, will be the maker’s priciest model, selling for $845,000 after it begins shipping next year.
And VW has not given up on affordable vehicles. The city car Up! was introduced last year, and this month a new generation of the Golf hatchback debuted in Berlin.
In 1934, Ferdinand Porsche was commissioned by the Nazis to design a mass-market car, and Volkswagen, or the “people’s car,” was established.
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