VW will spend $50 billion over 5 years on electric, connected and self-driving car tech

November 16, 2018 14:51 CET

Volkswagen Group is significantly raising investment plans for the next five years in the race to keep up with the shift to electric and self-driving cars, as well as new services in connected cars.

VW will spend 44 billion euros ($50 billion) through 2023, part of a push for now more than 50 full-electric models by 2025. This is 10 billion euros more compared with last year’s planning round.

The company’s supervisory board voted on Friday far-reaching capital spending plans to begin mass production of electric vehicles in Europe, the most radical strategy shift since VW’s diesel cheating scandal in 2015.

VW said it could build up to 15 million electric cars over several years on its new MEB electric vehicle platform. Management this week outlined plans for converting Germany car plants in Zwickau, Emden and Hanover to build electric cars, providing job guarantees to workers until 2028.

The I.D. Neo hatchback, the first of VW brand’s I.D. family of affordable electric cars, is due to roll off the production line in Zwickau in 2019, as the plant ramps up to a production capacity of 330,000 electric vehicles.

Mass producing electric cars will help VW reduce the cost to the same level as current diesel vehicles, VW Group CEO Herbert Diess said at a news conference in Wolfsburg, VW’s home town.

“Very emotional vehicles, high economies of scale, I think we will be the most profitable company in electric vehicles,” Diess said.

VW also is launching upscale full-electric Porsche and Audi models due to go on sale next year to keep up with Tesla.

Ford talks

VW’s MEB platform is also being eyed by Ford as the two companies continue exploratory talks about an alliance to develop self-driving and electric vehicles.

Diess said he hoped to have an outline agreement fleshed out by year end, with the initial focus on commercial vehicles. He said a merger with Ford was not on the agenda and also said there were no plans to take a stake in the U.S. company.

“Our two companies complement each other very well in terms of both products and regions. The joint development and manufacture of a range of light commercial vehicles is at the core of the envisaged cooperation,” Diess said.

VW expects significant synergy effects from this alliance, which may allow potential for developing a next-generation Amarok pickup and further SUVs, Diess said.

Jobs fear

VW also plans to increase productivity of its factories by 30 percent by 2025, by building more vehicles with different brands on the same production line. This will help lower the automaker’s capital expenditure ratio at the group’s automotive division to six percent of revenues from 2020 onward, the company said.

Labor unions, who control half the seats on Volkswagen’s supervisory board, need to sign off on the plan to create global production capacity for 1 million electric vehicles by 2025 amid their concerns that assembling battery driven cars will require fewer workers. Around 436,000 industrial jobs in Germany are tied to building gasoline and diesel vehicles.

Jobs are under threat because a combustion engined car has 1,400 components in the motor, exhaust system and transmission, while an electric car’s battery and motor has only 200 components, according to analysts at ING.

Reuters contributed to this report

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