VW to spend $50.2 billion on electric, autonomous vehicles by 2023

Ford ‘outline’ agreement expected by end of year, Diess says

WOLFSBURG, Germany — Volkswagen Group said it will spend 44 billion euros ($50.2 billion) on electric vehicles, digitalization, autonomous driving and new mobility services by 2023.

The automaker 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, it said.

This will help lower the carmaker’s capital expenditure ratio at the group’s automotive division to six percent of revenues from 2020 onward, the carmaker said.

The 44 billion euro plan is 10 billion euros ($11.4 billion) more compared with last year’s planning round.

The spending represents about a third of Volkswagen’s five-year budget on capital goods such as property and plants. Despite the increase, the world’s biggest carmaker stuck with a target of lowering capital expenditures to 6 percent of sales from 2020. To achieve this goal, VW’s plants, spanning some 120 facilities globally, will reduce costs. Last year, the ratio shrank to 6.4 percent.

VW is launching upscale electric Porsche and Audi models due to go on sale next year to keep up with other global automakers as well as more affordable vehicles under VW’s I.D. subbrand starting in 2020.

VW said it could build up to 15 million electric cars over several years on its new MEB EV production platform.

“Volkswagen must become more efficient, more productive and more profitable in order to finance the high expenditure in he future and stay competitive,” CEO Herbert Diess said during a press conference.

Since taking the helm in April, Diess has set about revamping the 12-auto brand behemoth to better meet future challenges, pledging to rein in bloated costs and boost economies of scale. A more agile setup is critical as the industry deals with slowing economic growth, trade barriers and the uncertainty of a post-Brexit Europe. German peers Daimler AG and BMW AG have cut their outlook, while Toyota Motor Corp. and General Motors Co. reported strong results.

Diess said he hoped to have an outline agreement on Ford cooperation 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 American company.

Jobs fear 

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-powered vehicles.

Jobs are under threat because a combustion engine 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.

Volkswagen’s management this week outlined plans for converting car plants in Zwickau, Emden and Hannover to build electric cars, providing job guarantees to workers until 2028.

The first ID electric car 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. Zwickau currently builds the VW Golf and the Golf Estate.

‘Ford remains a competitor’

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

“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 truck series and more SUVs, Diess said.

Diess said any arragement with Ford would exclude business strategy, marketing and pricing. He denied speculation the future partnership could be a prelude to cross-shareholdings or a merger.

He added: “That was never the goal of these talks. Ford remains a competitor.”

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