Audi raising vehicle pricing (again)

Audi recently raised MSRP to match BMW & Mercedes but Rupert Stadler said that the Volkswagen-owned luxury brand “would be prepared” to raise its prices next year if current cost trends continued, and depending on what its competitors did.

“If prices remain on this high level, the pressure for sure is increasing for everybody,” he said.

Carmakers rarely admit they are contemplating price hikes in one of the world’s most competitive industries, for fear of tipping off other manufacturers on their plans or losing market share. All face intense pressure from carbuyers to offer incentives on their vehicles, especially in slow markets such as the US.

The admission is especially noteworthy coming from Audi, a profitable premium brand seen by analysts as better-placed than most others to withstand tough markets because it pools many costs with its parent group.

Commodities rising prices has roughly doubled this year, adding to carmakers’ rising cost burdens arising from investment in cleaner ecological engines and smaller vehicles, and exchange rate-related losses on overseas markets.

“The real burden is not to be seen in 2008,” Mr Stadler said. “The big question is what is coming in 2009.”

Audi raised prices for some of its cars by between 0.5 per cent and 1.5 per cent earlier this year. BMW, the biggest producer in the luxury segment, raised its prices in the US, its largest market, by less than 1 per cent earlier this month. The pressure from rising costs is more intense for mass-market carmakers, which operate on thinner margins than luxury brands.

“If the industry is taking these head winds seriously, they will have to raise prices by 5 to 10 per cent,” said Arndt Ellinghorst, head of European automotive research with Credit Suisse. “But it could cost them 10 to 20 per cent of their volumes, and then we’re talking about under-utilised capacity.”

Like other carmakers, Audi is considering launching hybrid and electric vehicles, alongside other investments in new engines and technologies and lighter materials, to meet tougher emissions regulations.