VW Accelerates Electric Car Effort With $40 Billion Investment -- 2nd Update
18 November 2017 - 3:43AM
Dow Jones News
By William Boston
Berlin -- Volkswagen AG plans to invest around $40 billion over
the next five years to develop electric vehicles, self-driving cars
and Uber-like mobility app services in the clearest sign yet that
auto makers are betting the future of their industry on the new
technology.
Volkswagen's drive to produce electric cars and self-driving
vehicles comes as the entire industry pivots from a century-old
business model of building gas-powered cars for the family to
producing fleets of electric cars that in just a few years are
expected to drive themselves and be part of roaming robot taxi
services.
Critics have dismissed the vision of a driverless automotive
world as pie in the sky, but the multibillion-dollar gamble by the
industry's biggest players demonstrates that Volkswagen, Ford Motor
Co., General Motors Co., Toyota Motor Co., and others are committed
to develop the new technology and quickly get the new vehicles on
the road.
"The car is being reinvented," Volkswagen Chief Executive
Matthias Müller said on Friday, after the company's directors
approved his five-year budget, adding that the plan "creates the
framework to make Volkswagen number one world-wide in electric
mobility by 2025."
The Wolfsburg, Germany-based car maker is planning total direct
investment of around $85 billion by the end of 2022. The company
will continue to invest in conventional auto technology, but the
new budget shows that the focus is now on electric vehicles.
Volkswagen said it would retool its plant in Zwickau in eastern
Germany to become its first electric car plant in Europe. It is
expected soon to announce that will produce electric cars at its
U.S. plant in Chattanooga or its Puebla, Mexico factory.
The company has already said it would invest EUR12 billion to
build electric cars in China. That investment isn't included in the
overall budget, but is financed directly from Volkswagen's business
in China.
U.S. auto makers are also beginning to redirect investment
capital away from conventional engines and into electric cars.
Ford has said that by 2022 it would slash spending on
conventional engines by a third, around $500 million, and invest
instead in development electric and hybrid vehicles. That comes on
top of about $4.5 billion in planned spending to develop more than
a dozen new electric vehicles. GM plans to launch 20 electric
vehicles world-wide over the next six years.
But those plans pale in comparison to Volkswagen, which has
historically been the largest spender in the global auto industry.
Under its "Roadmap E" umbrella, Volkswagen plans to produce at
least one electric or hybrid version of each of its 300 models
world-wide by 2030 and is taking bids for battery cell orders worth
$59 billion to meet is production needs.
The industry still faces considerable hurdles as it goes
electric.
The global market share of electric vehicles is growing fast,
but is only around 1.2% so far this year, according to
EV-Volumes.com, which tracks global electric vehicle sales. In the
U.S., battery electric and plug-in hybrid vehicles account for
around 2% of new car sales.
The share of electric cars in a national market often depends on
the availability of incentives such as government-backed discounts
and traffic rules that give preference to electric cars over
conventional gasoline and diesel-powered vehicles.
In Norway, one of the most aggressive supporters of electric
vehicles, battery electric and plug-in hybrids have achieved a 35%
share of the new car market.
Potential buyers of electric have often been put off by the high
price tag and the fear of running out of power on the road.
Batteries are becoming more powerful and able to travel longer
distances and car prices are coming down as volumes rise and
battery prices fall. Volkswagen has said that it will launch a
battery electric compact car by 2020 that will sell for less than
$40,000, around the same price as its popular Golf today.
The industry is struggling to provide enough charging stations
to accommodate the millions of electric vehicles car makers are
planning to launch over the next decade. Ford, BMW AG, Volkswagen
and Daimler AG, which makes Mercedes-Benz cars, have created a
joint venture called Ionity to build a European network of 400
fast-charging stations by 2020.
Car makers have little choice but to step up production of
electric cars. From China to California, regulators are imposing
ever tougher emissions targets, outright driving bans for cars with
conventional combustion engines, or imposing quotas on the share of
electric cars in a company's overall fleet.
"This is why we have to complete the transformation toward
producing more electrically powered vehicles," said Frank Witter,
Volkswagen's finance chief.
Nathan Allen in Barcelona contributed to this article
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
November 17, 2017 11:28 ET (16:28 GMT)
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