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.

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