Volkswagen AG share price down, luxury-car brand Audi boosts investment plan

Audi, Volkswagen AGs premium-car brand, said that it plans to boost investments in technology development and the expansion of production by €2 billion to a total of €24 billion ($29 billion) over the next five years as it tries to globally outsell BMW, the leader in luxury-car sales.

“We are making large investments in the innovative areas of electric mobility, connectivity and lightweight construction,” Audis Chief Executive Officer Rupert Stadler said in a statement. “We place top priority on sustainable growth.”

According to the company, the €24-billion investment will be spent primarily for the development new models, technologies and production sites. An official representative of Audi explained that the announced investment program is part of a plan of its parent company to overtake Toyota as the worlds top car manufacturer.

Volkswagen announced in November it will boost capital investment to €85.6 billion in the period from 2015 to 2019, boosting previous plans by about €1.1 billion.

Currently, Audi generates about 40% of the entire groups total operating profit. As the brand explained in its statement, about 70% of the spending is planned to be assigned to new models and technology development. Audi shared that it will focus on technologies such as emission-cutting plug-in hybrid vehicles, and electric cars.

Audi plans to spend more than 50% of the funds on its two factories located in Ingolstadt and Neckarsulm, which account for half of the auto makers output. Audi has set a goal of expanding its model range from 50 to 60 by 2020. The brand is also going to spend more than €1 billion on new plants situated in Brazil and Mexico.

BMW AGs namesake brand remains the leader in the luxury-car segment, but with a narrowing difference. BMW outsold Audi by only 42 600 vehicles in the 11 months through November 2014, compared to 54 600 a year earlier. However, Audi, which already outsells the leader in Europe and China, plans to head the scoreboard by the end of the decade after catching up in the US.

Volkswagen AG lost 1.10% to trade at €185.05 per share at 10:02 GMT in Frankfurt, marking a one-year change of -9.29%. The company is valued at €87.53 billion. According to the Financial Times, the 29 analysts offering 12-month price targets for Volkswagen AG have a median target of €216.40, with a high estimate of €260.00 and a low estimate of €150.00. The median estimate represents a 15.66% increase from the previous close of €187.10.