Volkswagen to invest $193 billion in batteries, raw materials in race for affordable EV

German auto giant is aiming to bring in an affordable EV, costing around $26,795 at today's prices, to market by 2025

By Reuters

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An employee of Volkswagen works on an assembly line to produce the VW ID.3 electric car model at the carmaker's factory in Zwickau, eastern Germany.
An employee of Volkswagen works on an assembly line to produce the VW ID.3 electric car model at the carmaker's factory in Zwickau, eastern Germany.

Published: Tue 14 Mar 2023, 11:08 PM

Volkswagen plans to invest $193 billion over five years in areas including battery production and the sourcing of raw materials in a bid to cut electric vehicle costs and protect its market share, the German automaker said on Tuesday.

Over two-thirds of the company's five-year investment budget is allocated to electrification and digitalisation, including up to $16 billion for batteries and raw materials.

With markets in turmoil over the collapse of Silicon Valley Bank, VW's chief financial officer Arno Antlitz told analysts, however, that the company could postpone some battery investments if the market did not grow as expected.

"The overall target is having at all times solid financials," Antlitz said.

On Monday, board member Thomas Schmall also announced that Volkswagen's first North American battery cell factory would be in Canada, with production starting in 2027. He said the carmaker's needs were covered in Europe by the three plants already in the works, and that it was in no rush to pick new sites.

Volkswagen, Europe's top carmaker, is working to close a gap with electric vehicle (EV) pioneer Tesla by expanding its slice of the growing market for battery-powered cars.

The carmaker is still aiming to bring an affordable EV — costing around $26,795 at today's prices — to market by 2025.

Antlitz said he hoped that by then the company would have struck enough raw material sourcing deals and expanded battery production to bring down EV costs, 40 per cent of which stem from the cost of the battery.

The carmaker said it was finalising high-performance software for its premium and luxury brands, which could in the medium term be applied across the company, in an attempt to improve operations at its software unit Cariad.

The unit set up under former CEO Herbert Diess has gone over budget and fallen behind on its goals, suffering an operating loss of $2.3 billion in 2022, according to the carmaker's annual report released on Tuesday.

Bright outlook

In its results released on Tuesday, Volkswagen met analysts' expectations on 2022 revenues but missed the consensus estimate for earnings before interest and taxes.

The company's latest investment decisions are targeted at fulfilling a 10-point plan developed by Volkswagen CEO Oliver Blume after he took the helm in September.

Volkswagen will share the results of a "virtual equity story" exercise instigated by Blume — which had all of the company's brands from Audi to Bentley prepare for a listing as a training exercise — at a capital markets day on June 21.

The most likely actual stock market candidate is battery unit PowerCo.

Earlier this month, the carmaker issued an optimistic outlook for the year ahead that sent shares soaring. It forecast a 10 to 15 per cent rise in revenue on 14 per cent higher deliveries.


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