Volkswagen CEO Oliver Blume speaks during the company's annual business report, in Berlin, on March 14.JOHN MACDOUGALL
Volkswagen plans to invest €180-billion ($193-billion) over five years in areas including battery production and raw material sourcing in a bid to cut electric vehicle costs and protect its market share, it said on Tuesday.
Over two-thirds of the company’s five-year investment budget announced on Tuesday is allocated to electrification and digitalization, including up to 15 billion for batteries and raw materials.
With markets in turmoil over the collapse of Silicon Valley Bank, Chief Financial Officer Arno Antlitz told analysts however that the company could postpone some battery investments if the market did not grow as expected.
“The overall target is having at all times solid financials,” Antlitz said.
Volkswagen, Europe’s top car maker, is striving to close a gap with electric vehicle (EV) pioneer Tesla by expanding its slice of the growing market for battery-powered cars.
The car maker is still aiming to bring an affordable EV – costing around 25,000 euros ($26,795) at today’s prices – to market by 2025, produced on a second-generation version of its all-electric MEB platform.
Antlitz said he hoped the company would by then have struck enough raw material sourcing deals and expanded battery production to bring down EV costs, 40 per cent of which stem from the cost of the battery.
“We expect to reach 20 per cent 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 car maker said it is finalizing 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 in 2022 on revenue of €800-million, according to the carmaker’s annual report released on Tuesday.
Shares in Volkswagen were 2.6 per cent lower by 1122 GMT on Tuesday, with analysts at Jefferies describing the detailed final fourth-quarter results as “weak.”
Volkswagen met analysts’ expectations in 2022 on revenues but missed the consensus estimate for earnings before interest and taxes by 3 per cent.
The investment decisions are targeted towards fulfilling a 10-point plan developed by Volkswagen CEO Oliver Blume after he took the helm in September.
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.
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.
The most likely actual stock market candidate is battery unit PowerCo.
All brands had already set profitability and cash flow targets at a summit in January, Blume said, without sharing what these were.
The car maker this month issued an optimistic outlook for the year ahead that sent shares soaring, forecasting a 10 per cent to 15 per cent rise in revenue on 14 per cent higher deliveries.