Volkswagen to invest 180 billion euros over 5 years to hit EV target

VOLKSWAGEN plans to invest 180 billion euros (S$259.5 billion) over the next five years in areas including battery production and its North American operations, it said on Tuesday (Mar 14), with spending on combustion engines to fall from 2025.

As it works toward a target of 50 per cent electric vehicle (EV) sales globally by 2030, over two-thirds of the five-year investment budget is allocated towards electrification and digitalisation, up from 56 per cent in a five-year plan it had released a year earlier.

The carmaker is expected to provide an update later on Tuesday on how it will improve operations at its software unit Cariad, which was set up under former chief executive Herbert Diess but has gone over budget and fallen behind on its goals.

The unit suffered an operating loss of 2.1 billion euros in 2022 on revenue of 800 million euros, Volkswagen said in its annual report released on Tuesday.

In the latest investment plan, 15 billion euros is ringfenced for battery plants and raw materials, with the company focusing first on securing the raw materials it needs and then on building new sites.

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

Investment in combustion engine technology will peak in 2025 and decline from then on, said the carmaker, which has more ambitious electrification targets than some rivals.

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

The carmaker 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 despite supply chain challenges.

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Volkswagen’s earnings margin in 2022 was at the upper end of its 8.1 per cent forecast, with sales and earnings outpacing 2021 levels despite supply chain turmoil dragging its net cash flow far below target. REUTERS