Audi Will Cut Costs by $12 Billion to Fund Shift to Electric Cars, Reports Say

Audi is planning 10 billion euros ($12 billion) in cost cuts by 2022 in order to fund the launch of new electric cars, according to multiple reports.

The bulk of these cuts will come from research and development costs, reported Reuters, citing anonymous sources. The German business daily Handelsblatt also reported on the cost-cutting targets. Cost cuts will help Audi undertake the capital-intensive process of launching a fleet of electric cars, while keeping its profit margin at 8 percent a year.

Audi plans to launch its first mass-market electric car next year. Called the e-tron, it's an electric SUV based on the e-tron quattro concept from the 2015 Frankfurt Motor Show. The e-tron will be followed in 2019 by a second SUV, the e-tron Sportback. Both will be built at an existing Audi factory in Belgium.

While Audi's electric car efforts may have gotten off to a slow start with the misbegotten R8 e-tron, the German automaker is getting more serious about electrification. Including the e-tron and e-tron Sportback, it has five all-electric models waiting in the wings—part of a larger electric-car push by parent Volkswagen aimed at erasing the stink of the diesel-emissions scandal.

Cutting R&D funding to help launch new electric cars could also slow development of new gasoline and diesel models, possibly marking the beginning of a shift to electric power. Volvo has said it will launch only electrified vehicles after 2019, and Maserati may go that route too. But completely electrifying Audi's larger lineup may be a more gradual process.