Volkswagen to invest $193 billion in electric cars and software

Volkswagen said on Tuesday it would spend $193 billion on software, battery factories and other investments as it aims to make one in five vehicles sold electric by 2025.

The automaker, the world’s second-largest after Toyota, will also focus on expanding its presence in North America, where it has struggled for years, and becoming more competitive in China, one of its biggest markets. important,” said Volkswagen CEO Oliver Blume.

Mr Blume outlined a 10-point plan to help Volkswagen turn to electric vehicles, a path he started in earnest when he effectively ditched diesel technology after an emissions cheating scandal in 2015. Centerpiece of the plan are investments totaling 180 billion euros, or about $193 billion. Two-thirds of this sum will be spent on battery cell production, software development and strengthening supply chains of critical raw materials.

“For me, it’s important that we have a clear direction on where we’re going,” Blume told reporters, adding that 2023 would be “a breakthrough year” for the company. This is his first as general manager; he took over in September from Herbert Diess, who aggressively pushed Volkswagen to embrace electric cars but was forced out after just four years due to disagreements with the company’s board.

Mr Blume hopes to use some of the proceeds from a 2022 IPO of Porsche, of which he is also chief executive, to bolster Volkswagen’s electrification strategy. The listing brought in 43 billion euros.

Volkswagen reported net profit in 2022 of 15.8 billion euros, or $16.7 billion, an increase of 2.6% over the previous year, as supply chains disrupted by the coronavirus pandemic have started to normalize.

Russia’s invasion of Ukraine last year caused energy prices to rise and contributed to high inflation, especially in Germany. Addressing these challenges, while balancing demand for combustion engine vehicles as the company shifts to electric vehicle production, will be the main focus in Europe, Volkswagen said.

“We need to transform into a mobility technology and services group,” Volkswagen chief financial and operating officer Arno Antlitz said at Tuesday’s media event. “We need to focus on our platforms, such as our hardware for battery electric vehicles, a unified software stack, batteries, mobility, autonomous driving.”

In the short term, Volkswagen will continue to produce cars with combustion engines, which generate profits that the company must pay for the transition to battery-powered vehicles. In 2022, Volkswagen sold 8.2 million cars and trucks.

Despite the German government’s call for companies to diversify their operations in Asia, away from China, Volkswagen continues to invest in the country in partnership with local companies.

Volkswagen is China’s top producer of combustion-engine vehicles, but has lost ground to domestic automakers in the rapidly growing electric car market. Last year, Volkswagen launched an “in China for China” strategy that it plans to expand, including developing technology and software specifically for consumers there, including in-car karaoke.

The automaker’s problems in North America are somewhat different. After years of trying to become a bigger player in the United States in particular, it remains far behind American automakers like General Motors and Ford Motor and Asian companies like Toyota and Hyundai.

Volkswagen revamped its Chattanooga, Tennessee, plant last year to start producing electric vehicles, and it now produces the ID.4 sport utility vehicle there. On Monday, Volkswagen announced that it has chosen a site in Ontario for a new battery plant. And earlier in March, the company announced it would set up a factory in South Carolina to build pickup trucks and SUVs that would be sold under the moribund Scout brand.

In Europe, a key part of the company’s direction includes its first battery cell factory, a 2 billion euro plant emerging from a field in Salzgitter, Germany, near the headquarters of the company in Wolfsburg. The new plant sits behind a site where Volkswagen has been building engines for more than 50 years and is expected to become the automaker’s main battery cell supplier.