Audi’s profitability slipped during the third quarter as spending on plants and models outweighed gains from record sales of luxury car sales.

Audi, part of the Volkswagen group, is spending more than €1 billion ($1.3 billion) on new plants in Mexico and Brazil, and may for the first time build more cars outside Germany than within its home country in 2014.

Audi is Volkswagen's flagship division and the source of about 40 per cent of its profits, and it overtook Mercedes-Benz in 2011 to become the world's second biggest premium automaker behind BMW.

Profit as a proportion of sales at Audi eased to 9.2 per cent in the third quarter, from 9.4 per cent a year ago, the carmaker said yesterday. At Mercedes the measure jumped to 8.6 per cent from 7.6 per cent thanks to improved pricing.

Volkswagen last week reported a 16 per cent increase in third quarter operating profit.

Audi also raised its revenue guidance, predicting a “moderate” increase in revenue which totalled €49.9 billion last year. The brand had forecast a “slight” gain in 2014 revenue.

Europe’s luxury carmakers avoided the worst of the downturn in their home region, thanks in part to strong demand from the US and emerging markets.

Still, some €22 billion of planned spending on models, plants and technology through 2018 means Audi’s operating margin may return to its 8-10 per cent target range from 10.1 per cent in 2013 and 11 percent in 2012, Audi said.

While quarterly sales were up 7.2 per cent to 429,295 cars, demand for Audi’s SUVs such as the Q5 and higher-priced models including the A6 saloon, has seen its overall 2014 sales lead over Mercedes shrink to 103,494 cars after nine months, from 118,110 a year ago.

Some of Audi’s models have peaked and the brand has pushed planned overhauls of its top-selling A4 and the Q7 SUV into 2015. – Reuters