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Volkswagen's Audi keeps margin target despite Q3 profit drop

[BERLIN] Audi is sticking to profitability targets, though its quarterly operating margin fell behind that of German rival Mercedes-Benz as declining sales in China as well as costs of new models and plants weighed on results.

Volkswagen's flagship luxury division said on Monday it still expects a return on sales of 8-10 per cent this year after the benchmark slid to the bottom end of the range between July and September from 9.2 per cent a year ago.

Separately, Audi said it "could experience changes affecting the organisational and economic business process" as a result of the emissions scandal at parent VW, which reported results last Wednesday.

An Audi spokesman said orders and sales were stable, declining to elaborate.

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Mercedes-Benz, which eclipsed Audi in global sales in the first nine months, reported a 10.5 per cent third-quarter margin for its luxury-cars division, helped by new model launches and surging Chinese sales, up from 8.5 per cent a year earlier.

Luxury-car sales champion BMW will publish results on Tuesday.

A 4.4 per cent decline in Audi's third-quarter Chinese sales to 140,558 cars and costs of launching a redesigned A4 saloon as well as starting production in Brazil strained the automaker's results. "Audi achieved good earnings in a challenging environment despite high levels of advance expenditure," finance chief Axel Strotbek said.

Drawing on strong demand in Europe and the United States, Audi said it expects to beat last year's record 1.74 million global deliveries.

Audi plans to keep hiring and has affirmed a jobs guarantee through 2018, but its top management is examining the 24 billion-euro (S$37 billion) 2015-19 budget plan to squeeze out cost savings, sources at VW said.