By on November 15, 2019

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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14 Comments on “Volkswagen Boosts Tech Spending to $66 Billion Over Five Years...”


  • avatar
    ToolGuy

    The picture – foreground: A logo is a logo. It is not a door. Please do not cheapen your image by turning your logo into a functional part. Have some respect for yourself. (Oh wait, this is VW?)

    The picture – background: The tension on that charging cable (the background one, not the foreground one) really bothers me. At the other end of that cable are some plastic parts being stressed in ways they shouldn’t be. (Negative bonus points to the charger “designer” who put the strain relief at a 90 degree angle. But I’m more concerned about the connection at the vehicle.)

  • avatar
    SCE to AUX

    Outspending Tesla is the only way to succeed in the EV market, and VW seems serious. Tesla can blame Brexit for not building its European Gigafactory 4 in England, but choosing Berlin for the plant takes the fight right to VW’s home turf.

    VW knows it’s a waste of time to shove some technicians into a 50,000 square foot outbuilding only to roll out a few hand-built EVs.

    “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”

    It depends on what fraction of the car’s price is incentivized. Tesla sales haven’t seen much effect from dwindling Federal subsidies, but they never comprised a big portion of the sales price. An extreme example was in Denmark (IIRC) where reinstituting a 64% (IIRC) import tax effectively killed Leaf sales.

    • 0 avatar
      ToddAtlasF1

      “Outspending Tesla is the only way to succeed in the EV market, and VW seems serious.”

      What does success in the EV market mean? Bankruptcy? Endless capital burn? Societal collapse?

      • 0 avatar
        thornmark

        Tesla reminds of AOL, wildly inflated and destined to crash – but the only question is timing

        Lutz on Autolline Detroit noted that Musk’s genius was pricing high and having bigger batteries than the rest plus good styling – because electric motors and batteries are a commodity

        soon there will plenty of high end competition and where it already exists, Tesla suffers greatly

        we have seen Tesla sales drop precipitously where incentives are removed and that can be expected to continue – their sales literally crashed in the US this last quarter

        Best bet- Teslas are like Minis, when all the people that want one get one, the market will diminish

        • 0 avatar
          SCE to AUX

          Lutz is a big talker who’s been bullish on Tesla for a decade, all while Tesla continues to expand its portfolio and market dominance. He gets airtime because he has cool hair. I’m not sure why anyone takes him seriously.

          Saying “batteries are a commodity” proves your ignorance of the technology.

      • 0 avatar
        SCE to AUX

        Tesla is at or near profitability, and they own the western EV market, not to mention outselling many major brands. I’d call that success.

    • 0 avatar
      thornmark

      >>Tesla sales haven’t seen much effect from dwindling Federal subsidies,<<

      not really

      they crashed last quarter in the US – down by 39%

      Tesla’s U.S. Sales in Third Quarter Fell 39%, Filing Reveals

      – Bloomberg

      • 0 avatar
        redapple

        LUTZ ON AUTOLINE.

        Is that the one where he was crunching on crackers for the WHOLE show?
        He nor the hosts nor the producer had the common sense or maybe the balls to say STOP IT.

  • avatar
    gasser

    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.

    • 0 avatar
      SCE to AUX

      VW is preparing for the future. Following downward trends only guarantees failure. When the market rebounds, climate hysteria will still be there, and VW will have products available for sale.

      It’s the same thing Germany did during the interwar period and worldwide depression. It chose to build up its military and infrastructure so that it would be ready for WW2, while the Allies were cutting back.

    • 0 avatar
      bufguy

      They did pay out a huge amount of money, but they are also profitable with a huge line of cars ranging from SEAT to Lamborghini and Bentley. Failure to invest even with those huge payouts would surly lead to their demise. Instead of licking their wounds they are moving aggressively forward.

    • 0 avatar
      dantes_inferno

      >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.)

  • avatar
    Mike-NB2

    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.

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