Volkswagen to invest $193 billion over 5 years to hit EV target

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Volkswagen to invest $193 billion over 5 years to hit EV target
Volkswagen to invest $193 billion over 5 years to hit EV target

BERLIN, March 14 (Reuters) – Volkswagen (VOWG_p.DE) plans to invest 180 billion euros ($193 billion) over the next five years in areas including battery production and its North American operations, it said on Tuesday, though the pace of spending will fall from 2025.

The investments come as Volkswagen, Europe’s top carmaker, tries to close a gap with electric vehicle (EV) pioneer Tesla by expanding its slice of the growing market for battery-powered cars.

As it works toward a target of EVs accounting for 50% of its sales globally by 2030, over two-thirds of the five-year investment budget is allocated towards electrification and digitalisation, up from 56% in a five-year plan it had released a year earlier.

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The difference from the previous plan is primarily down to more investment in its battery business, raw materials, and a $2 billion plant for the Scout brand, Chief Financial Officer Arno Antlitz said.

“We expect to reach 20% electromobility in new sales from 2025 and are already investing two-thirds in that area,” Antlitz said. “On the other hand we need to keep combustion engines competitive… that is a double burden.”

The carmaker said it is finalising high-performance software for its premium and luxury brands which could in the medium-term be applied across the company, in an attempt to improve operations at its software unit Cariad.
The unit set up under former CEO Herbert Diess has gone over budget and fallen behind on its goals, suffering an operating loss of 2.1 billion euros in 2022 on revenue of 800 million euros, according to the carmaker’s annual report released on Tuesday.

Shares in Volkswagen were 3.1% lower by 0958 GMT on Tuesday, at the bottom of Frankfurt’s DAX index, with analysts at Jefferies describing the detailed final fourth-quarter results as “weak”.

Volkswagen to invest $193 billion over 5 years to hit EV target
Volkswagen to invest $193 billion over 5 years to hit EV target

Annual news conference of the Volkswagen Group at DRIVE.Volkswagen Group Forum, in Berlin

Volkswagen met analysts’ expectations in 2022 on revenues but missed the consensus estimate for earnings before interest and taxes by 3%, with logistics issues weighing on fourth-quarter results.

In the latest investment plan, up to 15 billion euros is ringfenced for battery plants and raw materials.

Board member Thomas Schmall said on Monday the carmaker’s needs were covered in Europe by the three plants already in the works, and that it was in no rush to pick new sites. It also announced its first North American plant in Canada, due to start production in 2027.

VW outperforms EU rivals

The investment decisions are targeted towards fulfilling a 10-point plan developed by Volkswagen CEO Oliver Blume after he took the helm in September.

Volkswagen will share the results of a ‘virtual equity story’ exercise instigated by Blume, which had all of the company’s brands from Audi to Bentley prepare for a listing as a training exercise, at a capital markets day on June 21.

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The most likely actual stock market candidate is battery unit PowerCo. Reuters in November reported talks were on with investors to buy into the division ahead of a possible partial listing.

The carmaker this month issued an optimistic outlook for the year ahead that sent shares soaring, forecasting a 10% to 15% rise in revenue on 14% higher deliveries despite supply chain challenges.

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