A production version of this 2012 concept Urus is scheduled for launch in 2018. Image source:Automobili Lamborghini S.p.A.
I have some great news, dearest auto readers. If you make a ton of money, have a soft spot for SUVs, and love the iconic Lamborghini brand, you're in for a treat: The Italian automaker is set to produce its first SUV in more than two decades, set for a 2018 launch.
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For the rest of us who can't afford a Lamborghini, it's still an impressive ride to read about. Also, for investors, this Lambo SUV has more potential for the revenueof parent companyVolkswagen Group than many realize. Let's dig in.
Made in Italy Lamborghini has come to terms with Italy's government to hire as many as 500 people in the nation to help with part of the production effort, in return for benefits including up to $98 million in tax breaks. The good news is that the end result (expected in 2018) might be a slightly more affordable Lamborghini,at least relative to prices that averaged nearly 250,000 euros per car over the entire brand last year -- the SUVhas an estimated cost of about 180,000 euros.
To help reduce production costs, certain key components, including the chassis, will be produced at Volkswagen Group factories that also build the Audi Q7 and the frame for the Porsche Cayenne SUV. The new Lamborghini SUV and the other two vehicles all share the tall version of the MLB Evo platform.
"The introduction of a third model signifies for us the beginning of a new era," Lamborghini CEO Stephan Winkelmann said in a statement, according to Reuters.
New era, indeed -- but in reality Lamborghini putting the Urus SUV concept into production is a no-brainer.
The richest people on Earth love to buy ultra-luxury vehicles. Lamborghini's deliveries in 2014 rose nearly 20%, to 2,530 vehicles, from the prior year. Lamborghini has previously said it believes it could sell 3,000 of the production SUV based on the Urus conceptannually, which would be a quick way to double sales and potentially profits. Now, as a Ford and General Motors shareholder, I think the idea of 2,500 to 5,500 unit sales moving the revenue or profit needle of a company seems crazy. However, Lamborghini's price tag on its vehicles makes this a different ballgame.
2012 Concept Urus SUV. Image source: Automobili Lamborghini S.p.A.
To figure out how much Lamborghini means to the bottom line of Audi, which is owned by Volkswagen Group, you'll have to do some digging -- or just continue reading.
Made of moneyAudi -- whose division's financial data includes that of Lamborghini and Ducati-- generated a meager 15% of Volkswagen Group's vehicle deliveries in first-quarter 2015. However, because Audi and Lamborghini have much higher price tags and margins than the mainstream Volkswagen vehicle brand, the impact is much larger than the unit sales would suggest. Consider that this 15% of VW's total deliveries generated 32% of VW's total automotive division revenue, and a staggering 50% of the automotive division's operating profit.
Going a step further, Lamborghini only generated about one-tenth of 1%, or 0.1%, of Audi's automotive deliveries in 2014. Yet, again, because Lamborghinis carry a significantly higher price tag than Audi vehicles,Lamborghini generated more than 11% of Audi's automotive segment revenue for the full year.
Ultimately, with SUV sales booming in every segment of the auto business, from mainstream vehicles to luxury crossovers to the ultra-luxury models, the move is easy to understand. With the U.S. and China buying into the revived SUV market, particularly on the luxury end of the spectrum, if Lamborghini can indeed sell 3,000 units of ultra-luxury SUVs each year, a potential doubling of its revenue and profit will be a much bigger deal than its handful of global sales figures would suggest.
The article Why Lamborghini's New SUV Is a Bigger Deal Than Many Realize originally appeared on Fool.com.
Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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