Posted Nov 18, 2019 at 7:00 am
Volkswagen, which already gave the competition to its competitors with its colossal resources and unmatched sales, decided to drive the point. The world’s largest manufacturer announced Friday, during the annual update of its investment plan, that it intends to invest 60 billion euros in the period 2020-2024 in the electric motor, hybrid engines and digital. That is an annual rate of spending on these topics of 12 billion a year, compared to the 8.8 billion announced just 12 months ago.
Of this amount, 33 billion will be spent over 5 years to the only electric mobility which is 10% more than expected a year ago. This sum will enable the group to introduce 75 100% electric models in its range over the next 10 years, to which will be added 60 hybrid models.
ID3 opens the way
The first electric model of this salvo was presented in early September opening of the Frankfurt lounge. This is the ID3, a small city full of curves. By 2029, Volskwagen plans to sell 26 million electric cars worldwide and 6 million hybrid vehicles.
In his speech, the boss of the group Herbert Diess affirmed that the electro-mobility was good for the planet, the employees, the customers, and even the shareholders. In fact, the group does not have much choice: it must like its European competitors forcibly reduce its CO2 emissions, and reach next year average emissions below 95 grams per kilometer, on pain of being fined, which can very quickly amount to hundreds of millions of euros. Rapidly increasing the share of electric vehicles (which do not emit CO2) is therefore crucial. In terms of image, it is also for the German group the opportunity to forget the dieselgate.
No short-term amortization
Conversion is all the more expensive as the market is still embryonic, and does not allow to consider in the short term the volumes likely to quickly amortize research and development expenses such as investments in production lines (VW plans to 9 factories, including 5 in Germany and 2 in China, to produce electric vehicles). To reduce costs, the Wolfsburg company intends to intensively use the “SEM” platform entirely dedicated to electric vehicles. Rode on the ID3, it must equip 20 of the 26 million vehicles to come. Not to mention possible partnerships with other manufacturers.
Where most competitors have to look for alliances or mergers ( like PSA and Fiat-Chrysler ) to make the necessary resources available for the transition to the electric, VW, with its 12 brands and its crown of world sales champion (with 5.24 million cars sold in the first half alone), has the scope to to assume alone this titanic effort.
It can rely on solid results for this, but will nonetheless have to inflict a severe cure of savings. As Herbert Diess has pointed out, future investments will be financed by “traditional activities”. This implies for them even more productivity, especially with synergies between brands that should be deepened. In addition, the only VW brand has already programmed between 5,000 and 7,000 job cuts.