Automotive Industry overviewAccording to Scotiabank (2017) in figure 1, the number of cars sold globally is expected to reach 79.5 million vehicles by the end of 2017, which is up from an annual average of 53.7 million vehicles in the years between 2000 to 2013 and China and the United States are the two largest automobile markets worldwide with the expected number of vehicles to be sold around 17.10 and 24.28 million units in the U.S. and China, respectively. However, as shown in the figure 2 for the passenger cars, about 6.9 million cars were sold to U.S. customers and almost 25 million units were sold in China in 2016 (Statista, 2017). Figure 1: International car sales outlook (Scotiabank, 2017) Figure 2: Sales of passenger cars in selected countries worldwide from 2005-2016 (Statista, 2017) In addition, based on new car registrations between January and December 2016, there were about 23.7 million new car registered in China and about 17.5 million of vehicles registered in the U.S.(Statista, 2017). Overall, new registrations increased in Western Europe, Central and Eastern Europe, the Asia-Pacific region and South America but however, were down in North America (Audi AG, 2017). According to the annual report of Audi AG (2017), the Western European automotive market recorded 2.8 percent growth in new registrations and 10.6 percent growth in new vehicle registrations for the Russian automotive market. For the most important market, the number of new car registration in China rose by 4.5 percent (Audi AG, 2017). The luxury car segment is primarily driven by rising demand from increasingly wealthy buyers in China. As seen in figure 3, the global luxury car market was valued at roughly 245 billion euros in 2012 and has steadily increased to reach 438 billion euros in 2016 (Statista, 2017). Despite the rise of these markets, markets such as the United States and Europe remain important target countries. Figure 3: Global luxury car market size from 2010 to 2016 (Statista, 2017)For the global sales of luxury car brands in units in 2016 as in the figure 4, Mercedes-Benz leads the luxury market of around 2.08 million cars, followed by BMW with approximately 2 million vehicles and Audi came the third with a record volume of around 1.87 million vehicles (Statista, 2017). From the figure 4, it can be seen that the three main biggest players are Mercedes Benz, BMW and Audi. Figure 4: Selected luxury car brands: global sales in 2016 (Statista, 2017)As the statistics abovementioned show that there has been levels of growth globally in terms of number of cars sold, number or registrations and market size, especially in the Chinese luxury car market which Audi, according to Datamonitor Independent Research (2017), is the market leader. Therefore, the positive overview of the global automotive industry, particularly in China, will provide opportunities for Audi. Overall performance of AudiAudi Group classifies its operations into two reportable segments: Automotive and Motorcycles, which recorded revenue of EUR 58,587 million and EUR 730 million, respectively in fiscal year 2016 (Audi AG, 2017). Geographically, the company classifies its operations into six geographic segments: Germany, Rest of Europe, Asia-Pacific, North America, South America and Africa, which recorded revenue of EUR 12,895 million, EUR 20,386 million, EUR 14,055 million, EUR 11,081 million, EUR 576 million and EUR 324 million, respectively in fiscal year 2016 (Audi AG, 2017). By percentage, Germany accounted for 21.73% of the company’s total revenues, followed by Rest of Europe with 34.36%; Asia Pacific with 23.69%; North America with 18.68%; South America with 1%; and Africa with 0.54% (Audi AG, 2017).Although Audi is headquartered in Germany, it derives most of its sales outside of its home market. Sales in Germany were EUR 12.90 billion which was about 21.7% of total sales in 2016, an increase of 7% (Audi AG, 2017). Audi also experienced significant increases in sales in Europe, excluding Germany, with an increase of 4.5% to EUR 20.39 billion and North America up 2.0% to EUR 11.08 billion (Audi AG, 2017). Although the company’s overall sales increased, sales were not up in all regions of the world. Sales in Asia-Pacific were down 6.08% to EUR 14.06 billion, sales in South America fell 12.32% to EUR 576.00 million; and sales in Africa fell 14.51% to 324.00 million Euro (Audi AG, 2017). In term of production and deliveries during 2016, Audi produced 1,903,259 cars, including 1,899,680 models of Audi and 3,579 models of Lamborghini brands (Audi AG, 2017). During the same period, the company delivered 2,088,187 vehicles to customers, including 1,867,738 models of Audi, 3,457 vehicles of Lamborghini, and 216,992 vehicles of other VW brands (Audi AG, 2017). Out of the total Audi models delivered, the company sold 293,307 vehicles in Germany, 801,116 vehicles in Western Europe excluding Germany, 591,554 vehicles in China including Hong Kong, 210,213 vehicles in the US, and 28,452 vehicles in Japan (Audi AG, 2017). Trends of automotive industryOver the next decade, it is believed that the future of the car would be electric, autonomous and connected car. So, electrification, automation and digitalization will probably change everything in cars people are driving nowadays. Internet-connected car technologies and autonomous vehicles will evolve to another revolution in the automotive sector. By 2020, growing digitalization and advancements in technology will have increased the automotive industry investments to USD 82 billion (Newman, 2017). According to PwC (2016), the market share of autonomous and electric vehicles is expected to rise significantly. Autonomous driving might grow to 16-22% of new sales in 2025 (PwC, 2016). Furthermore “by 2035, 12 million fully autonomous units could be sold a year globally, and the market for partially and fully autonomous vehicles is expected to leap from about $42 billion in 2025 to nearly $77 billion in 2035” (BCG, 2017). By 2035, autos with autonomous vehicle features are expected to capture 25% of the new car market (BCG, 2017).However, for automakers, the change from current models to driverless cars will be a period of transformation. While not as prevalent on the road, driverless car technology is being experimented all over the world (Newman, 2017). According to Newman (2017), Elon Musk predicts the autonomous vehicle will become normal and the possibility of cars driving themselves will come to be a reality. One of the reason is that autonomous vehicle will decrease automotive accidents and deaths, and provide mobility and the freedom of travel to more people. Nowadays, assisted-driving is becoming more mainstream every day and it is anticipated in the next ten year that assisted-driving technology will be able to save consumers upwards of one trillion dollars by lowering insurance costs and,most importantly, more than 900,000 lives by decreasing accidents from this technology.(Newman, 2017). Moreover, according to Goldman Sachs (2017), concerns about greenhouse gases and pollution are the two key factors which drive the change of how vehicles are powered. “Regulations on fuel economy and CO2 emissions are forcing carmakers to make engines more efficient and by 2025, 25% of cars sold will have electric engines, up from 5% today” (Goldman Sachs, 2017). However, “most of those will be hybrids, and 95% of cars will still rely on fossil fuels for at least part of their power” (Goldman Sachs, 2017). Issing (2017) also predicts that “the alternative fuel market will reach USD 614 billion by 2022 and the Asia-Pacific region is continuing to corner this market, especially in China”. In addition, there are also some concerns about the potential new government regulation in China which will stop to the production and sales of diesel & fuel cars from the market in the near future (the Guardian, 2017). In fact, in July 2016, the Chinese’s market share for electric vehicles increased up to 1.1% of all new car sales which may not sound a lot; however, an increase of 1.1% meant 34,000 new electric vehicles in July 2016, an increase of 188% over June xx (Issing, 2017). With the concerns about greenhouse gases and various regulations across the world, mentioned earlier, Audi is being forced to meet changes and to act fast enough. Audi’s StanceFrom a standpoint of Audi, according to Audi.com (2017), its corporate strategy aims to be become the leading brand in the premium car segment by 2025 in the world and through this strategy, Audi primarily focuses on digitalization, sustainability and urbanization. Through Digitalization strategy, Audi intends to steadily digitalize the processes and develop a central platform for integrated, connected premium mobility and digital services (Audi.com, 2017). By 2025, Audi aims to achieve a third of the vehicles produced will be electric cars (Audi.com, 2017). Through urbanization strategy, by 2025, Audi aims to achieve a piloted driving and parking, which will play a key role and autonomous car will become an integral part of future intelligent, sustainable and connected mobility (Audi.com, 2017).Overall in the automotive industry, the competition to lead this change is intense, coming from companies both inside and outside the industry. According to Rainwater (2017), as fully autonomous cars are being tested in 53 cities worldwide, the first commercially available semi-autonomous cars could be on the market soon. Therefore, the automotive industry has to act and adapt quickly so that car companies can meet the current trends which are transforming the automotive industry.