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#VA Automotive: #Audi investments hike a sign of the times

VAALogoAudi AG , the premium-car brand owned by Germany’s Volkswagen AG , said Saturday it plans to invest €24 billion ($29.3 billion) over the next five years in new models, technologies and production sites, €2 billion more than in the previous planning period. That is according to an article in Wall Street Journal.

The investment program is part of a plan announced by parent Volkswagen last month, an Audi spokesman said. Volkswagen said in November it would boost capital investment to €85.6 billion from 2015 to 2019, about €1.1 billion above previous plans, largely driven by higher development costs associated with upfront investment in new technology needed to reduce CO2 emissions.

About 70%, or roughly €17 billion, of Audi’s investments will go into new models and technologies such as new combustion engines needed to meet CO2 limits world-wide, fuel-efficient gasoline and diesel engines and plug-in hybrid cars, the company said. It also will invest in improving vehicle connectivity and driver assistance and in expanding Audi’s world-wide plant network.

Audi’s announcement is the latest of several extensive investment plans by the automotive industry. One company to benefit from this trend is Sweden listed VA Automotive, which operates mainly within the vehicle industry (around 95% of group sales are related to the automotive sector). The group, which is a result of intensive M&A in recent years,  focuses on three strategically important business areas: tool engineering, automation and components/systems solutions.

In a recent exclusive interview with Nordic Investor, VA Automotive’s CEO Lars Thunberg said: “I believe that the coming years will be good for the automotive business. If we compare the developments in Europe with USA we will see a big change in automotive businesses in USA. There is almost no free capacity in the automotive business in USA, Volkswagen invests 7 billion USD in new plants to cover the new demand of cars. If we compare demand with supply in Europe we will see that the production is about 14.5 million sold cars. We believe that the demand is 16-17 Million cars and that this demand need to be field up. Accumulated demand from 2008 to today is approximately 20-30% per year over the supply! VA Automotive works with the whole supply change. We deliver tool & die automaton and automotive parts. VA Automotive is unique in its custom oriented offers, we offer one change in the production change or the whole concept where VA Automotive takes responsibility for product development to production (one stop-shop). All development today is about volume and new products, these two reasons push the development time closer together. Some years ago there was a maximum volume per sold car after 5 years, today the maximum volume is somewhere between 18 months and two years from the start of selling. This creates a big demand in tool making. For example Volvo will invest 75 billion SEK in new models from now to 2022, this is a perfect situation for tool makers. Scania is also launching new models of trucks, it has been 19 years since this happened last time. This is good news for investors who want to become owners in a small company with high value products and production. In four years we have bought 4 companies and there will be more mergers in the future.”

VA Automotive seems well-positioned to benefit from the heavy investments from automakers and its share is basically undiscovered by the market. We believe that VA Automotive’s share could easily double in the months to come. For a thorough look at the company see our recent article: http://nordicinvestor.net/2014/12/01/va-automotive-ipo-attractive-levels/

Nordic Investor

 

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