Audi Weighs Green Energy Investment in China to Slash Emissions

(Bloomberg) -- Audi is considering investments in clean energy for sites in China where the luxury car-maker is struggling to source enough power from renewable sources to churn out hundreds of thousands of vehicles each year.

Volkswagen AG's key earnings contributor has pledged to make its production network carbon-neutral by 2025, and has already moved plants in Belgium and Hungary onto a net-zero footprint. The task is more complex elsewhere, and particularly in China where fossil fuels remain a dominant source of power supply.

“China is the most difficult market to precisely forecast the tipping point toward electric vehicles, partly because of the availability of green energy sources in some regions,” Chief Financial Officer Juergen Rittersberger said in an interview. Audi may move to “investing in green energy ourselves at some locations.”

The move would echo efforts by peers like China's biggest private carmaker Zhejiang Geely Holding Group Co., which plans to install photovoltaic cells on the roofs of all of its factories within two years. China, the world's largest auto market, still relies on fossil fuels but is investing heavily in energy transition with $266 billion spent last year on the deployment of low-carbon technologies, according to a BloombergNEF report. That's more than a third of the record global total of $755 billion.

Audi, which produces around 1.8 million cars a year, operates four plants in China that make about 600,000 vehicles annually as well as roughly 270,000 gearboxes. Its main location is in Changchun in Jilin province in northern China.

As carmakers shift their lineups to battery cars to reduce emissions, a vehicle's green credentials are coming under scrutiny. Relying on fossil fuels to make and charge an EV battery eradicates much of the emissions advantage of an electric car.

Traditional manufacturers are facing the challenge of stepping up plans to replace gas-guzzlers with electric models that still generate lower profits than combustion-engine vehicles. After a bumpy start, Audi stepped up its game with the Audi E-Tron GT sportscar and the more affordable Q4 E-tron, which competes with Tesla Inc.'s Model Y. The vehicles share VW's mass-market EV technology to save costs.

Audi will flank the Q4 E-Tron with the mid-sized Q6 crossover next year that introduces new underpinnings for upscale EVs, which will also serve as a basis for an all-electric version of sister brand Porsche's Macan SUV. The technology is set to be deployed in a new venture China from 2024, pending regulatory approval.

“Strategically our focus is clearly on fully-electric cars,” Rittersberger said. “We see hybrids as a bridge technology.”

The Audi CFO declined to comment on plans to enter Formula 1 racing, including a possible tie-up with British sportscar-maker McLaren Group. “Motorsport is always a topic at Audi,” he said. “It's a catalyst to test new technologies.”