German carmaker Audi sinks outlook over China issues, Middle East war

German carmaker Audi on Monday cut its annual outlook, saying it expects lower revenue and returns amid an increasingly difficult market in China and escalating tensions in the Middle East.

After-tax profit in the second quarter fell by around 21% to €563 million ($642 million).

Ingolstadt-based Audi, a subsidiary of the Volskwagen Group, now expects revenues of between €58 billion and €63 billion this year, down from €63 billion to €68 billion. 

The carmaker also lowered its returns forecast, which would likely mean a lower overall profit. The figures include luxury brands Lamborghini, Bentley and Ducati.

However, the decline in profit is comparatively modest when set against the slump of almost one third posted by parent company Volkswagen in the second quarter. 

Chief financial officer Jürgen Rittersberger said he was hopeful of improvements in the second half of the year, driven in part by new models and lower costs. The second half is traditionally stronger, he said.

One of the drivers of the crisis is the situation in China, where Audi has recently lost significant ground in sales, as it has in the US. 

Fierce price competition is also a factor. Audi's China business, which is recorded under financial results due to local joint ventures, contributed just €73 million over the entire first half of the year - almost four times less than in the same period a year earlier.

The disappointing figures come amid reports that parent company VW is considering cutting tens of thousands more jobs across the group, with Audi's plant in the German town of Neckarsulm among four under review.

VW chief executive Oliver Blume recently stressed that he wanted to avoid plant closures. "There are smarter solutions than closing plants. That is always the last option," he said.

Rittersberger said Audi needs to press on and become more competitive and efficient.

That would require a major effort from both of the company's German plants - but there would be "no pitting of the two German sites against each other," he said.

A job-reduction programme is already under way at Audi. In March last year, the company announced the elimination of up to 7,500 jobs by 2029.

At the time, however, employment protection guaranteeing no compulsory redundancies was also extended until the end of 2033. Rittersberger said the reduction was progressing well.

Audi chief executive Gernot Döllner also addressed the cost-cutting efforts.

"Audi is a key component of the Group - and part of the solution," he said. "Our shared goal is a long-term, sustainable roadmap for the future."