Volkswagen Group to invest $AU289 billion in wave of new models

Electric vehicles – and the software powering them – are set to account for more than two-thirds of Volkswagen’s investment up to 2028, as it prepares a range of new electric cars across its brands.

The Volkswagen Group has announced plans to invest €180 billion ($A289 billion) over the next five years in new-car development, as part of a widening focus on electric vehicles (EVs) and automotive software development.

The investment is being made as Europe’s largest car maker attempts to establish itself at the forefront of electric-car sales through its large portfolio of passenger car brands, including Volkswagen, Audi, Bentley, Cupra, Lamborghini, Porsche, Seat and Skoda.

The $AU289 billion expenditure includes a new manufacturing factory for the revived Scout car brand in the US – due to launch in 2026 with an electric off-road ute and SUV – and a battery production facility in Canada.

Speaking an event for investors and media this week, Volkswagen Group chief financial officer Arno Antlitz reiterated a target for electric cars to account for 50 per cent of global sales annually by 2030, with €122 billion ($AU196 billion) – or some 68 per cent – of the five-year investment budget allocated to electrification and software development.

This is up from the €89 billion ($AU143 billion) – or 56 per cent allocation – for electrification and software development in the previous five-year investment budget revealed by former Volkswagen CEO, Herbert Diess, last year.

“We expect to reach 20 per cent electromobility in new sales from 2025 and are already investing in that area. On the other hand we need to keep [petrol and diesel] engines competitive. That is the double burden,” said Mr Antlitz.

The Volkswagen Group confirmed it is finalising software for upcoming models from its luxury brands – such as Porsche and Audi – which it says it is considering employing across all brands in the future in an attempt to improve economies of scale at VW’s software division Cariad.

The software division, established under Diess in 2020 and based in Germany, posted an operating loss of €2.1 billion ($AU3.4 billion) in 2022 on revenues of €800 million ($AU1.3 billion).

Included in the revised five-year business plan is a new electric-car manufacturing plant for Scout in the US state of South Carolina, as well as a battery production factory in St Thomas, Ontario, Canada.

Overall, the Volkswagen Group plans to build as many as seven battery factories, including six in Europe.

In its annual financial report, the Volkswagen Group has allocated up to €15 billion ($AU24 billion) for the establishment of battery plants and raw material procurement. It expects to generate annual battery sales of more than €20 billion ($AU32 billion) by the end of the decade.

While its focus is tilted towards electric-vehicle and software development, the Volkswagen Group says it will continue to develop petrol and diesel engines to meet touch new Euro 7 emission regulations.

However, it says it expects investment in this area to peak in 2025, when the new regulations are due to come into force.

Volkswagen Group recorded a €22 billion ($AU35 billion) profit for 2022, an increase of 12.5 per cent compared to 2021.

Included was a profit of €4 billion ($AU6.4 billion) from its “Volume Brand Group”, which includes Volkswagen, Cupra, Seat and Skoda, as well as €7.6 billion ($AU12.2 billion) from its “Premium Brand Group”, including Audi, Bentley, Lamborghini, Porsche and the Ducati motorcycle brand.  

Further contributors include the Traton Commercial Vehicles brand with an operating profit of €1.6 billion ($AU2.6 billion), and Volkswagen Financial Services, which added €5.7 billion ($AU9.1 billion) to the bottom line.

The German company’s best-selling electric vehicle in 2022 was the Volkswagen ID.4 and ID.5 with 193,200 combined sales globally. It headed the Volkswagen ID.3 with 76,600 sales and Skoda Enyaq iV and Enyaq iV Coupe duo with 53,700 combined sales.

Among the electric models planned for launch by the Volkswagen Group in 2023 are the facelifted ID.3 hatch, ID.7 sedan, ID. Buzz long wheelbase, Cupra Tavascan and Audi Q8 E-Tron. The target is for electric cars to account for up to 10 per cent of total sales by 2024. 

All of these vehicles except the ID.7 are bound for Australia between the second half of this year, and sometime in 2025.

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