Audi cautions on pricing pressures from euro crisis

MUNICH (Reuters) - German luxury car maker Audi's 11.5 percent profit margin may slide if deteriorating economic conditions in austerity-strapped southern Europe keep adding pressure to prices, the company's finance chief said on Tuesday.

"One cannot extricate oneself completely from the market," Axel Strotbek said at a press briefing in Munich, outlining the car maker's second-quarter results.

The Volkswagen division reaffirmed its aim this year of matching last year's record operating profit of 5.35 billion euros ($6.55 billion), provided that economic conditions don't worsen. Audi posted a 13.2 percent gain in operating profit to 2.88 billion euros.

The Ingolstadt-based manufacturer is turning out new models this year such as the revamped A3 compact and the A1 Sportback and expanding its global production footprint in a bid to overtake the luxury car market leader BMW .

Audi aims to increase deliveries to a record 1.4 million vehicles this year after demand from China, the U.S. and Germany spurred a 12.3 percent gain in six-month sales to 733,237 vehicles.

Audi said in its quarterly report that all major car markets may expand this year except in western Europe where the deepening fiscal crisis and government-induced spending cuts sap consumer demand.

Daimler's Mercedes-Benz, lagging BMW and Audi in the race for the luxury-sales crown, posted a smaller than expected 13 percent drop in its second-quarter operating profit, keeping to a forecast for roughly flat underlying earnings this year. BMW will publish results on Wednesday.

Strotbek said Audi's first-half earnings had received a boost of between 300-400 million euros from favorable exchange rate developments. Depending on currency moves, another 100-200 million euros could come in the second half, he said.

Audi is Volkswagen's cash cow, contributing 13.38 billion euros, or 90 percent, of its parent's industrial net cash of 14.86 billion euros.

(Additional reporting by Irene Preisinger; Editing by Greg Mahlich)

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