Volkswagen on track for shift to electrification

Volkswagen AG, the first major international carmaker to shift toward electrification, has decided to step harder on the accelerator to charge into the fast-rising new energy sector.

Up to 68 percent of its 180-billioneuro ($191.4 billion) investment from 2023 to 2027 will flow into the fields of digitalization and electrification, said the German car group at its annual news conference on Tuesday. In the last five-year plan, the figure was 56 percent.

The investment would be spent on things from pushing forward its battery strategy to increasing its competitiveness in digitalization and products in China.

Other things on the list include growing its presence in North America and developing the group's portfolio of vehicles.

Volkswagen said a major reason for the investment increase compared with the previous five-year period is up to 15 billion euros earmarked for the construction of cell factories by the battery startup PowerCo and upfront expenditures for securing raw materials as part of the implementation of the battery strategy.

By 2030, PowerCo is expected to generate annual sales of more than 20 billion euros, said Volkswagen.

It added that there will be ongoing investments in the last generation of combustion engines, with the peak to arrive in 2025, after which it will continuously decline.

The shift toward electrification will change the fabric of its sales. In 2022, Volkswagen sold 8.3 million vehicles globally, of which 572,100 units were battery electric vehicles.

It was the best-selling electric vehicle maker in Europe last year. Its EV sales in China, the world's largest and most competitive new energy vehicle market, soared 68 percent year-on-year.

"BEVs accounted for a record 7 percent share of total deliveries — a significant milestone that we will build upon this year as our popular model range continues to grow," said CEO Oliver Blume.

"In line with our 10-point plan, we took important steps to execute our strategy, including new product strategies for our brands, the streamlining of our platforms and a revised software roadmap," he said.

Blume released the 10-point plan soon after he took over as Volkswagen Group CEO in the second half of 2022.

The plan, which covers such items as electrification and digitalization, shows the group's dedication to accelerating its charge into the new era.

Volkswagen said BEVs now account for 16 percent of the group's order book.

It expects the share of BEVs in its global sales to reach around 10 percent for the whole year thanks to the arrival of new models including the new ID.3, ID.7, CUPRA Tavascan and Audi Q8 e-tron.

The figure is estimated to soar in coming years. By 2025, one in five Volkswagen Group vehicles sold worldwide is expected to have an allelectric drive, said the carmaker.

China continues to play an important role in the transformation of the industry and in meeting the group's decarbonization goals, it said.

The introduction of a cross-brand China board aims to significantly accelerate decision-making and development processes in the region, thereby leveraging more synergies between the brands.

It said the group's "in China for China" approach helped to further extend local partnerships.

With the Horizon Robotics partnership, Volkswagen will drive forward the development of driver assistance systems and highly automated driving in China, its largest market around the world.

The China branch of its software arm Cariad is accelerating research and development, and pushing forward a China-specific technology concept.

The move will enable the group to satisfy the needs of local customers more effectively, regularly bring them fresh, smart and comfortable travel experiences and realize its goals in the region.

"China's importance will increase even further in the coming decade, especially in the field of e-mobility," said Volkswagen.

Volkswagen said this "in China for China" approach is yielding impressive results. Last year, 143,100 all-electric ID. family vehicles were sold in the country, up 102.9 percent year-on-year.

Talking about the group's global prospects, Arno Antlitz, Volkswagen Group CFO and COO, said: "Our strong financial base puts us in a position to continue investing in the electrification and digitalization of our company, even in a challenging economic environment."

Last year, despite chip shortages and the pandemic, Volkswagen saw its operating profit before special items reaching 22.5 billion euros, up 12.5 percent compared with 2021.

The increase in earnings across all brand groups was driven by an improved product mix, mainly through the premium and sport brand groups including Porsche and Bentley and a stronger volume brand group.

Antlitz said the 2023 fiscal year will be no less challenging in view of the overall economic developments but the company is optimistic about its performance.

"Our strong brands, with their convincing product offerings and the order backlog of around 1.8 million vehicles, allow us to look ahead to the 2023 fiscal year with confidence. We aim to again generate robust returns in the current year," he said.