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

Volkswagen’s flagship division, source of about 40 per cent of its profits, overtook Mercedes-Benz in 2011 to become the world’s No 2 premium automaker behind BMW.

Audi is spending over €1 billion ($1.3 billion; Dh4.59 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.

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 on Monday.

At Mercedes the measure jumped to 8.6 per cent from 7.6 per cent thanks to improved pricing.

Europe’s luxury carmakers avoided the worst of the downturn in their home region, thanks in part to strong demand from the United States 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 per cent in 2012, Audi said.

While quarterly sales were up 7.2 per cent to 429,295 cars on demand for sport utility vehicles (SUV) such as the Q5 and higher-priced models including the A6 saloon, Audi 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 model and the Q7 SUV into 2015.

“Audi has fared much better than expected with its ageing line-up,” Frankfurt-based Bankhaus Metzler analyst Juergen Pieper said. “Mercedes is at a more favourable spot in its model cycle.”

Research firm IHS Automotive anticipates no change in the pecking order.

Deliveries of BMW brand cars may jump 23 per cent to 2.04 million models by 2019 from an estimated 1.66 million this year, according to IHS. By comparison, sales may rise 16 per cent at Audi to 1.91 million and 12 per cent at Mercedes to 1.67 million, it said.

BMW is due to publish third-quarter results on November 4.