In a strategic pivot, Audi has retracted its 2033 full – electrification target, as reported by Autocar. The German automaker will no longer set an end – date for internal combustion engine (ICE) vehicle production, reversing a decision made in 2021 by its former CEO, Markus Duesmann, who announced the phased halt of ICE production by 2033 at the Berlin Climate Conference.
Gernot Döllner, the current CEO, emphasized that this decision was not made unilaterally but was a strategic shift already in the works under the previous management. Flexibility now stands as the core of Audi’s strategy. Concurrently, the company has streamlined its product lineup: the A1 and Q2 will not be renewed, with the A3 and Q3 set to be the new entry – level models. The A8 will retain its flagship sedan status, and the Q7, Q8, and the rumored Q9 will form the high – end SUV lineup.
Market Pressures and Setbacks
Audi’s decision comes amid market challenges. In 2024, its global sales dropped 11.8% to 1.6712 million units, the steepest decline among the BBA (BMW, Benz, Audi) trio and surpassed by Tesla. Sales in major markets, including Germany, North America, and Europe, declined by 21.3%, 12.7%, and 5.9% respectively. In China, its largest single market, deliveries fell 10.9% to 649,900 units, with market share being eroded by local new – energy players. As J.D.Power pointed out, traditional luxury brands like Audi face fierce competition from new – energy automakers.
On the electrification front, the Brussels plant, a cornerstone of Audi’s electric – vehicle (EV) push, shut down on February 28. Despite a 2018 transformation to produce EVs like the e – tron, Q8 e – tron, and Q4 e – tron, plummeting demand, structural issues, and high costs led to its closure. The Q8 e – tron’s sales nosedived, dropping 4.3% in 2023 to 49,000 units and a further 27% in 2024, highlighting Audi’s struggles in the EV transition.
Profitability and Cost Hurdles
Profitability issues have hampered Audi’s EV ambitions. Each Q4 e – tron sold incurs a 1,500 – euro loss, contrasting sharply with the 2,800 – euro net profit of the BYD Han L in Germany. Consumers perceive Audi’s EVs as having low cost – effectiveness, dampening sales and profits.
Cost – wise, developing new EV platforms, battery tech, and intelligent driving systems demands substantial investment. The delay of the SSP pure – electric platform due to CARIAD’s software glitches has added time and cost, forcing Audi to collaborate with Rivian. Building new EV production lines and retrofitting factories in Europe, with its high labor costs (German workers’ hourly wage is 28 euros, 5.6 times that of Chinese workers), has also ballooned expenses.
The Necessity of the ICE “Safety Net”
However, Audi’s combustion – engine vehicles remain its stronghold. In the Chinese market, FAW – Audi sold 611,100 units in 2024, with 550,100 being ICE vehicles, maintaining its lead in the domestic luxury ICE – vehicle segment. Technologies like quattro all – wheel drive, long – standing features in Audi’s ICE models, still draw consumers.
Continuing ICE production provides stable cash flow and profits, supporting Audi’s R&D in electrification and intelligence. This year, Audi plans to launch 10 new plug – in hybrid models as complements to mainstays like the A6 and Q5, catering to consumer preferences for both ICE driving experiences and the trend towards electrification.
Audi’s decision to retain ICE production does not signal abandonment of electrification but a more pragmatic path. By leveraging the stability of ICE vehicles, Audi aims to balance the costs of electrification while capitalizing on its ICE – related expertise to fuel its electric future. This strategic realignment could well be the key to Audi’s long – term success in an evolving automotive landscape.
