Audi’s Understated First Plug-In Veers From Distinct BMW i3

Jun 27, 2014 6:42 am ET

(Updates with share price in ninth paragraph.)

June 27 (Bloomberg) -- Audi AG, the world’s second-largest maker of luxury vehicles, is betting that green-car fans are more interested in low emissions than distinctive designs.

While electric autos like the BMW i3 and Tesla Model S garner interest because their styling stands out, Audi’s first plug-in hybrid is a modified version of its A3 hatchback that looks identical to the conventional model. The A3 Sportback E- Tron can drive emission free for 50 kilometers (31 miles) and will cost as much as 15,100 euros ($20,600) more than its gasoline-powered twin when it goes on sale this month.

Adding electric technology to the existing model lineup “gives us maximum flexibility,” Rupert Stadler, head of the Volkswagen AG unit, said yesterday in a meeting with journalists in Vienna. “We can react better to changes in demand,” while producing a separate hybrid or fully electric model “also means fixed costs.”

Audi’s under-the-hood approach to clean-car technology diverges from the path taken by rival Bayerische Motoren Werke AG. The biggest luxury-car manufacturer created the “i” subbrand to showcase its electric offerings. The battery-powered i3 city car and the plug-in hybrid i8 sports car have plastic exterior body panels and unique styling to make them stand out from other cars on the road.

Extra Cost

“BMW created a product that is totally different,” while Audi as well as Daimler AG’s Mercedes-Benz “try to integrate e- mobility into their existing vehicles,” said Christian Breitsprecher, a Frankfurt-based analyst with Macquarie Europe Ltd. The advantage for Audi and Mercedes is “if there’s lots of demand, they can produce a lot. If not, they can allocate the capacity to their normal cars.”

While that may keep spending under control, the question is whether customers will pay extra for technology that’s not evident from the curbside. The E-Tron model starts at 37,900 euros in Germany, while the base gasoline-powered version costs 22,800 euros. One of the few evident differences between the two is the E-Tron’s almost noiseless driving in the city.

Inroads by electric-car maker Tesla Motors Inc. into the luxury-car segment show that wealthy drivers are ready to buy upscale green cars, if they get noticed. That goes for the BMW i3 as well. Demand for the compact car prompted the Munich-based company to triple production of carbon fiber, which is used for the frame.

Q7 Plug-In

“In an i3 and the Tesla, the attributes of luxury, modern technology and protecting the environment are clearly visible to everyone,” said Breitsprecher. The Audi plug-in “doesn’t show off that the consumer paid extra.”

Volkswagen shares rose as much as 0.9 percent to 192.30 euros and were up 0.1 percent at 12:41 p.m. in Frankfurt trading. BMW shares slipped 0.5 percent.

Still, the risk for Audi is more to its image as a technology leader, with demand for plug-in hybrids and electric vehicles expected to remain restrained because of the cost and limited range. The segment is forecast to account for just 5.7 percent of global auto production in 2019, according to IHS Automotive.

To ramp up its offering, Audi plans to add plug-in hybrid technology to each of its models, including the Q7 sport-utility vehicle and A6 sedan, by the end of the decade.

“We have maximum flexibility and that’s smart,” Stadler said.

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