February 21, 2024

Volkswagen said on Tuesday it will spend $193 billion on software, battery factories and other investments as it aims to have one in five cars sold be electric by 2025.

Volkswagen Chief Executive Oliver Blume said the world’s second-biggest carmaker behind Toyota would also focus on expanding its struggling business in North America and on its most important One of the markets China is improving competitiveness.

Mr Blume laid out a 10-point plan to help VW switch to electric vehicles, a path that Volkswagen began in earnest when it effectively abandoned diesel technology in the wake of an emissions-cheating scandal in 2015. Central to the plan are investments totaling 180 billion euros, or around $193 billion. Two-thirds of that will be used to produce batteries, develop software and strengthen supply chains for key raw materials.

“It’s important to me that we have clarity on where we are going,” Mr Blume told reporters, adding that 2023 would be a “defining year” for the company. It was his first time as chief executive; he succeeded Herbert Diess in September, who had aggressively pushed VW to embrace electric vehicles, only to resign just four years later amid disagreements with the company’s board. forced to quit.

Mr Blume hopes to use some of the proceeds from Porsche’s initial public offering in 2022 to bolster Volkswagen’s electrification strategy. The listing brought in revenues of 43 billion euros.

Volkswagen posted 2022 net profit of 15.8 billion euros ($16.7 billion), up 2.6 percent from the previous year, as supply chains hit by the coronavirus pandemic began to normalize.

Russia’s invasion of Ukraine last year drove up energy prices and led to high inflation, especially in Germany. VW said addressing these challenges, while balancing demand for combustion-engined vehicles as the company shifts to electric vehicle production, would be a major focus in Europe.

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

In the short term, Volkswagen will continue to produce cars with internal combustion engines, which should generate the profits the company needs to transition to battery-powered vehicles. In 2022, Volkswagen will sell 8.2 million cars and trucks.

Despite calls from the German government for the company to diversify its business in Asia and shift its focus away from China, Volkswagen has continued to partner with local companies and invest in the country.

Volkswagen is China’s leading producer of internal-combustion-engine vehicles, but has lost out to domestic automakers in the fast-growing electric car market. Last year, Volkswagen unveiled a planned expansion of its “in China for China” strategy, which includes developing technology and software specifically for Chinese consumers, including in-vehicle karaoke.

The automaker’s problems in North America are somewhat different. After years of trying to become a bigger player in the U.S., it still lags far behind U.S. automakers such as General Motors and Ford Motor Co., as well as Asian companies such as Toyota and Hyundai.

Last year, VW retooled its Chattanooga, Tennessee, plant to start making electric vehicles and now makes the ID.4 sport utility vehicle there. On Monday, Volkswagen said it had selected a site in Ontario to build a new battery plant. In early March, the company said it would build a plant in South Carolina to build pickups and SUVs that will be sold under the dying Scout brand.

In Europe, a key element of the company’s focus includes its first battery factory, a €2 billion plant in Salzgitter, Germany, near the company’s headquarters in Wolfsburg. The new plant is located behind a plant where Volkswagen has been making engines for more than 50 years and is planned to be the automaker’s main battery supplier.

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