Volkswagen Goes All-in on Electric Cars for the Next Five Years with €73 Billion Investment
Ten billion Euros may not suffice when vying for EV supremacy. Case in point, Volkswagen indicated during its latest five-year strategic meeting that it will raise its funding for EV R&D to €73 billion, the breakdown of which is as follows: €35 for BEV development, €27 for digital transformation, and €11 for HEV development.
VW’s strategic reallocation of its budget sees the automaker raising its R&D funding from 40% of the total budget to 50% now, not only to dethrone technological leader Tesla, but also to pull away from VW’s other traditional competitors.
“The transformation of the (Volkswagen) Group and its brands and the strategic focus on the core areas of mobility will be consistently implemented,” said Hans Dieter Pötsch, chairman of the supervisory board of Volkswagen. “Considering the enormous challenges we face in the coming years, our financial basis is very solid.”
One of the reasons for VW’s newfound faith in injecting additional capital into its EV aspirations is that Renault and VW, both of which are Europe-based automakers, finally usurped Tesla’s pole position in the burgeoning European EV market in 3Q20 and took first and second places, respectively.
The VW Group believes that the global economy will maintain a slow but steady growth in the next five years, while individual markets will exhibit greater and greater local differentiations. Within the coming five years, VW hopes to simplify its cars’ exterior designs in order to raise efficiency. By the way, it seems apropos to point out that VW’s five-year plan excludes its Chinese marque, which contains capital infused from Chinese parties.
In its pursuit of smartization, VW established an in-house software company called Car.Software, specializing in innovative automotive software platforms. According to VW, “The company’s own share in software is to increase from 10 to 60 percent.” As well, the new automotive software developed by Car.Software will see it initial use in Audi cars starting in 2024 at the earliest.
On the other hand, VW’s large-scale investment into EV means injecting capital into its home turf of Germany. Hannover, Emden, Wolfsburg, and Salzgitter, for instance, will reap the benefits of VW’s investment. For the ruling party in the German government, this boost to the local economy represents a political win as well, especially in the face of the foreign industrial presence on German soil that is Tesla’s Gigafactory Berlin-Brandenburg.
VW expects to manufacture about 26 million BEVs within the next 10 years, across 70 different models. Judging by the 20 models currently available, VW is well ahead of its planned schedule. VW is also the most aggressive in EV strategies among all traditional carmakers with regards to investment, manufacturing, and announcements.