Audi’s Electric Concept Heralds Fresh Bid to Counter Tesla

(Bloomberg) — Audi offered a first glimpse of a full-size electric sedan that will be key to narrowing a technology gap with Tesla Inc. and boosting profits by the end of the decade.

The Grandsphere design concept is the precursor to a sedan slated for production in 2025 that will boast an all-new software stack capable of taking over the task of driving from humans under certain conditions. In autonomous mode, the steering wheel and pedals tuck away and free up more interior space.

“Highly automated driving is the game-changer in the auto industry,” Oliver Hoffmann, Audi’s development chief, told reporters ahead of Europe’s first motor show since the pandemic next week in Munich. The comment echoes the view of Herbert Diess, chief executive officer of Audi’s parent Volkswagen AG, who expects autonomy to be even more transformative than electrification.

VW’s premium-car unit has embarked on a deep overhaul to boost efficiency and share technology across Europe’s biggest auto-making group, with joint efforts ranging from software to battery cells. Developing these components requires massive investments as the industry pivots away from internal combustion engines.

“For some of our competitors, this is becoming a question of survival, so we’re grateful to be part of such a strong group,” Audi CEO Markus Duesmann told reporters. Superior economies of scale compared to rivals like Mercedes-Benz, BMW AG or Tesla should help Audi boost sales and profitability, he said.

Big Ambitions

Audi expects to almost double annual deliveries to 3 million cars in 2030 compared to 1.7 million last year, when sales were slammed by the Covid-19 pandemic.

“This goal is very ambitious, but in light of the market forecasts and our attractive product portfolio, it’s possible,” Duesmann said. “At the same time, profitability is key.” 

Audi has resumed posting quarterly return on sales within its targeted 9%-to-11% range. Growing economies of scale achieved by the VW group suggest that sustaining an 11% margin “is definitely realistic for us in the long term,” Duesmann said. He expects a big chunk of the brand’s anticipated growth will come from selling more mid- and full-size vehicles.

The Grandsphere concept is 5.35 meters long (17.6 feet) and sports 23-inch wheels. It can recharge with enough energy for more than 300 kilometers (186 miles) of driving in 10 minutes and top out at more than 750 kilometers of range.

It’s the first vehicle developed by an engineering task force dubbed Artemis that was set up last year after executives concluded initial efforts to take on Tesla were falling short.

Audi has pledged that from 2026 onward, all new vehicles it introduces will be fully electric, but sustaining profits from combustion-engine models will be vital to help finance the technology shift. The brand expects the margin gap between electric and combustion cars to close in two or three years.

“The combustion-engine business will remain an important earnings driver this decade,” Duesmann said. “The last generation of combustion models will be the very best yet.”

(Updates with features in the second paragraph.)

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