Audi forecasts margin rebound in 2026 but battles on with tariffs

• Operating profit fell 14% to 3.4 billion euros in 2025 due to tariff costs, which are expected to remain at current levels
• In China, Audi launched a 'sister brand' without its iconic rings, introducing the E5 Sportback with SAIC, though sales were below expectations in early 2026
• The Audi group includes Lamborghini, Bentley, and Ducati brands and is exploring establishment of its first U.S. manufacturing plant to mitigate tariff impact

Summary

Volkswagen's premium brand group Audi forecasts an operating margin recovery to 6-8% in 2026, up from 5.1% in 2025, after absorbing a €1.2 billion tariff impact last year. The company reported a 14% decline in operating profit to €3.4 billion in 2025, down from 6.0% margin in 2024.

CEO Gernot Doellner cited "geopolitical uncertainties and global competitive pressure" as ongoing challenges, with tariff costs expected to continue at current levels. The company is considering establishing its first U.S. manufacturing plant to mitigate tariff exposure, though no decision has been announced.

China Market Struggles

Audi faces significant headwinds in China, where deliveries fell 5% in 2025. To counter intense local competition, the brand launched a "sister brand" strategy, removing its iconic four-ring logo for a China-exclusive electric vehicle. The E5 Sportback, co-developed with state-owned SAIC, debuted in April 2025 but has underperformed expectations in its first two months, according to CFO Juergen Rittersberger.

Brand Portfolio

The Audi group includes luxury marques Lamborghini, Bentley, and motorcycle manufacturer Ducati. Management emphasized cost discipline as partially offsetting 2025's tariff-related expenses.

Market Implications

The guidance suggests ongoing margin pressure for European automakers navigating tariff regimes and Chinese market competition. Audi's regional strategy shift—including de-emphasizing traditional brand identity in China—signals the extreme measures legacy manufacturers are taking to compete with domestic Chinese EV producers. The pending U.S. plant decision will be critical for mitigating future tariff exposure.