Volkswagen Boosts Tech Spending to $66 Billion Over Five Years

Matt Posky
by Matt Posky
volkswagen boosts tech spending to 66 billion over five years

Volkswagen Group has decided to increase spending on the development of electric and digital technologies over the next five years to 60 billion euros ($66 billion USD). The automaker estimated the revised strategy amounts to slightly more than 40 percent of its investments in property, plant and equipment, and all research and development costs during the planning period.

Of that sum, 33 billion euros are expected to go directly toward the development of new electric vehicles. The increase allocates roughly €12 billion annually for hybridization, electric mobility and digitalization. The old plan set aside 8.8 billion euros per year.

“We will step up the pace again in the coming years with our investments. Hybridization, electrification and digitalization of our fleet are becoming an increasingly important area of focus. We intend to take advantage of economies of scale and achieve maximum synergies. In light of the worsening economic situation, we are also working on increasing our productivity, our efficiency and our cost base so as to secure meeting our targets,” Volkswagen Group CEO Herbert Diess said in a statement.

It’s a lot of money to be spending in an era where the automotive market looks anything but healthy. We’re entering into a period of stagnation in practically all developed markets — places where EVs would sell — and Volkswagen is busy dumping truckloads of cash into them. To be fair, VW has already dug itself in pretty deep with electrification. In attempting to course-correct following its diesel emissions scandal, the automaker presumed electrification would be the best way to future-proof itself against tightening emissions regulations.

While this may one day prove itself the best strategy, EV sales aren’t manifesting at a rate where they seem to be on only horse worth backing. For example, Ford is readying new electric models (and spending plenty to develop them) while keeping its sales emphasis on gas-guzzling SUVs and pickups. Yet Volkswagen wants to produce 75 all-electric models, along with about 60 hybrid vehicles, by 2029 — totally transforming its lineup.

Volkswagen Group also plans to increasing electrification within the Porsche and Audi brands using its PPE high-performance electric platform. However, the vast majority of new EVs are said to be coming out of VW, riding atop the brand’s versatile MEB architecture.

Asked to give some background on why the German automaker is so willing to rush headlong into electrification, Diess suggested it was better to spend more to become a leader in the field — as opposed to falling behind has the market evolves. But that presumes the market will evolve with VW, something that’s largely dependent upon regional emission rules and consumer acceptance.

Europe looks to be on course to continue cracking down on vehicular pollution, stressing out pretty much every manufacturer while giving EV-focused brands an opportunity to shine. However, the conditions have to be right. After tamping down the heavy incentivizing of electric cars, China saw sales plummet as a result. It’s still unclear how much momentum EVs actually have without strong government support or superior hardware that would make them as versatile as internal combustion vehicles.

Volkswagen acknowledged the realities of the market, saying that it would have to lower sales expectations even as it increases spending. It lowered its full-year outlook for vehicle deliveries in October, warning of slowing demand around the globe.

“Despite the gain in market share, the Volkswagen Group anticipates that vehicle markets will contract faster than previously anticipated in many regions of the world,” the company said.

[Image: nrqemi/Shutterstock]

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  • Gasser Gasser on Nov 15, 2019

    I am astounded that VW continues to find cash to fund these projects. Diesel gate must have cost them close to $20B with fines, buy backs and legal fees. That money has paid a 0 rate of return. As auto sales as a whole are nosing downward, where is their funding coming from?? Is this all due to the historically low interest rates? Between the high cost of electric vehicles, recharging times, faltering electrical grids world wide (see recent California power suspensions in times of fire and in times of excessive demand) from where will come the future sales to provide the profits to repay these investments?? Just because European cities ban ICE vehicles, doesn’t mean its a good idea. Remember that Europe laughed at the U.S. in the mid 70s when we began equipping gas vehicles with catalytic converters and they were sure the future lay in Diesel engines.

    • See 2 previous
    • Dantes_inferno Dantes_inferno on Nov 19, 2019

      >I am astounded that VW continues to find cash to fund these projects. Diesel gate must have cost them close to $20B with fines, buy backs and legal fees. That money has paid a 0 rate of return. As auto sales as a whole are nosing downward, where is their funding coming from?? VW Group is one of the top three largest automakers worldwide. And contrary to provincial thinking in this country, the U.S. represents one of VW's smaller markets (behind Europe, China, South America, etc.)

  • Mike-NB2 Mike-NB2 on Nov 16, 2019

    Not to be 'that guy,' but any design feature that requires the driver to do something unsafe needs to be rethought. Backing into traffic has to be among the most dangerous things to do while driving that is also VERY easily fixed.

  • BEPLA My own theory/question on the Mark VI:Had Lincoln used the longer sedan wheelbase on the coupe - by leaning the windshield back and pushing the dashboard & steering wheel rearward a bit - not built a sedan - and engineered the car for frameless side windows (those framed windows are clunky, look cheap, and add too many vertical lines in comparison to the previous Marks) - Would the VI have remained an attractive, aspirational object of desire?
  • VoGhost Another ICEbox? Pass. Where are you going to fill your oil addiction when all the gas stations disappear for lack of demand? I want a pickup that I can actually use for a few decades.
  • Art Vandelay Best? PCH from Ventura to somewhere near Lompoc. Most Famous? Route Irish
  • GT Ross The black wheel fad cannot die soon enough for me.
  • Brett Woods My 4-Runner had a manual with the 4-cylinder. It was acceptable but not really fun. I have thought before that auto with a six cylinder would have been smoother, more comfortable, and need less maintenance. Ditto my 4 banger manual Japanese pick-up. Nowhere near as nice as a GM with auto and six cylinders that I tried a bit later. Drove with a U.S. buddy who got one of the first C8s. He said he didn't even consider a manual. There was an article about how fewer than ten percent of buyers optioned a manual in the U.S. when they were available. Visited my English cousin who lived in a hilly suburb and she had a manual Range Rover and said she never even considered an automatic. That's culture for you.  Miata, Boxster, Mustang, Corvette and Camaro; I only want manual but I can see both sides of the argument for a Mustang, Camaro or Challenger. Once you get past a certain size and weight, cruising with automatic is a better dynamic. A dual clutch automatic is smoother, faster, probably more reliable, and still allows you to select and hold a gear. When you get these vehicles with a high performance envelope, dual-clutch automatic is what brings home the numbers.