Volkswagen Group invests €122 billion in electrification

In the next five years, two-thirds of VW Group’s investments will be turned to electric and connected cars. The Group foresees €122 billion in investments in electrification, 68% of its total investment portfolio of €180 billion. The latter is also heightened by 13% compared to earlier multi-annual plans of the Group. At the same time, the Group is still exploring the possibilities of alternatives like e-fuels.

One of the major investments is, of course, the manufacturing of its own battery plants, three in Europe (Germany, Spain, and Sweden) but others also in other continents, like the recently announced one in Canada. In this race into electrification, Volkswagen already wants 11% of its 2023 sales to be fully electric, compared to 7% in 2022.

The US and China

A lot of these investments will be focalized in North America and China. That’s not a coincidence, as these two countries are luring many investments from car companies with ample incentives and subsidies.

For VW, China is already the most important market. Still, it struggles to impose its EVs there, confronted with fierce opposition by, for example, Tesla and a growing number of Chinese manufacturers.

That’s why it has recently decided to lower its EV prices over there. Tesla has recently passed the two million EVs sold marker, and a Chinese brand like BYD sold 911 000 fully electric models in 2022.

VW Group CEO Oliver Blume: “We are strong in Europe and China; we have a strong ambition for North America. The US is our second-biggest market after China.”

Volkswagen will produce EVs of its ID. family in its factory in Chattanooga (Tennessee), and will also revive the Scout brand (pickups and SUVs), which will be fully electric and have a dedicated plant where, most possibly, electric Audi’s could be assembled.

VW wants to cash in on the IRA incentives and subsidies the Biden administration released at the end of last year. As a result, the Group intends to increase its 4% market share in the US to 10% by 2030.

Europe and e-fuels

In Europe, Blume wants to stay more open-minded than his predecessor Herbert Diess. That he’s also still the CEO of Porsche is no coincidence. The sports car manufacturer, who had a very good 2022, is one of the prominent advocates of e-fuels, together with other luxury sports car manufacturers like Ferrari.

Their influence on governmental decisions reaches beyond their sole economic weight: Germany and Italy now oppose the EU plan to ban ICE cars in 2035.

Porsche has built a pilot factory in Patagonia (Chili) for e-fuels with Bosch and Siemens Energy. The plant will initially produce a mere 130 000 liters of green fuel, but in 2025, Porsche hopes to produce 55 million liters and ten times more (550 million liters) in 2027.

The main problem is that e-fuels are still very expensive. But that’s less of a problem for Ferrari or Porsche owners than for the humble Skoda possessor. That’s why the entire VW Group considers electrification its main trump card.

One out of five

The VW Group thinks that in 2025, one vehicle out of five will be fully electric. Last year, the Group announced that it wanted 50% of its sold cars in 2030 to be fully electric, and it hopes to sell almost 100% of EVs by 2040. The Group’s three best-selling BEVs in 2022 were the VW ID.4/ID.5 (193 200 units), the VW ID.3 (76 600), and the Skoda Enyaq iV (53 700).

In 2023, several significant new BEVS for the Group will be presented, including the facelifted ID.3, the ID.7, the ID. Buzz Long Wheelbase, the Cupra Tavascan, and the Audi Q8 e-tron.

Neat financial results

Despite a 7% decrease in worldwide sales, VW Group registered a slight increase of 2,6% in net benefit, up to €15,9 billion. The Group, representing ten different brands, wants to sell 9,5 million vehicles in 2023, over a million more than last year. “The bottlenecks in production and deliveries will disappear progressively in 2023,” the company predicts.

In 2023, the VW Group foresees a 10 to 15% rise in turnover and an operating margin between 7,5 and 8,5%. The ‘VW renewal’  will also take care of Cariad, the software arm of the Group, which hasn’t been functioning very well since its creation. Blume’s predecessor Herbert Diess tended to make a spearhead of Cariad; his successor is now merely talking about ‘a significant investment’.