It's all about the SUV.
A decade ago, Audi introduced its first SUV, the Q7, which didn’t even reach the U.S. until late 2006. Today, more than 44% of the carmakers U.S. sales are SUVs.
That number will likely grow as the luxury unit of Volkswagen Group adds another SUV to its model lineup. On Monday, Audi said it would introduce the Q2 compact SUV and a revamped Q5 as part of a nearly $3 billion spending plan for 2016.
Audi’s decision to add another SUV aims to tap into the booming crossover market. Total U.S. car sales this year are on pace to exceed the current record of 17.4 million vehicles set in 2000. Crossovers and SUVs are driving much of that growth.
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Audi’s bet on SUVs to increase sales explains the company’s electric vehicle strategy. Last month, Audi of America president Scott Keogh told Fortune that by 2025, at least one quarter of all Audi cars sold in the U.S. will have a plug.
The 2016 A3 Sportback e-tron, a plug-in electric hybrid, marks the company’s entry into U.S. electric car sales. However, its first all-electric vehicle will be a luxury-class SUV that will go into general production in early 2018.
“For us, it was very important to build a car where the population is,” Keogh explained at an event ahead of the Los Angeles Auto Show in November. “You’re not going to get broad acceptance unless you put vehicles in the market where the mainstream audience is.”
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Audi reaffirmed its commitment to the all-electric SUV in Monday’s announcement. The all-electric vehicle will be based on the Audi e-tron Quattro concept that made its debut in September at the International Motor Show in Frankfurt. The SUV, which will have a 311-mile range, doesn’t have an official name yet. For now, the concept vehicle is being called the e-tron Quattro.
Also on Monday, Audi said it would expand the number of car models is sells to 60 from the 52 it had as of May 2015. The 60 models will include seven plug-in electric vehicles.