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Volkswagen to invest $193 billion in electric cars and software

by SuperiorInvest

Volkswagen said Tuesday it will spend $193 billion on software, battery factories and other investments as it aims to make one in five vehicles sold electric by 2025.

The carmaker, the world’s second-largest after Toyota, will also focus on expanding its presence in North America, where it has struggled for years, and increasing competitiveness in China, one of its most important markets, Volkswagen CEO Oliver Blume said.

Mr. Blume laid out a 10-point plan to help Volkswagen transition to electric vehicles, which is the way to go he began in earnest when it effectively abandoned diesel technology in 2015 following an emissions-cheating scandal. At the center of the plan are investments totaling 180 billion euros, or about 193 billion dollars. Two-thirds of this amount will be directed to the production of battery cells, software development and support of supply chains of critical raw materials.

“For me, it’s important that we have a clear direction of where we’re going,” Mr. Blume told reporters, adding that 2023 would be a “decisive year” for the company. It is his first role as CEO; he was taken over in September by Herbert Diess, who aggressively pushed Volkswagen to adopt electric cars, but was forced out after just four years due to disagreements with the company’s board.

Mr Blume hopes to use some of the proceeds from Porsche’s 2022 initial public offering, where he is also chief executive, to boost Volkswagen’s electrification strategy. The IPO brought in 43 billion euros.

Volkswagen reported a net profit of 15.8 billion euros, or $16.7 billion, in 2022, up 2.6 percent from a year earlier, as supply chains disrupted by the coronavirus pandemic began to normalize.

Russia’s invasion of Ukraine last year caused energy prices to rise and contributed to high inflation, especially in Germany. Addressing these challenges while balancing demand for combustion-engine vehicles as the company shifts to electric vehicle production will be a major focus in Europe, Volkswagen said.

“We need to transform ourselves into a technology and mobility services group,” Arno Antlitz, Volkswagen’s chief financial and operating officer, said at a media event on Tuesday. “We need to focus on our platforms, like our battery electric vehicle hardware, unified software package, battery, mobility, autonomous driving.”

In the short term, Volkswagen will continue to make internal combustion engine cars that generate the profits the company needs to pay for the transition to battery-powered vehicles. In 2022, Volkswagen sold 8.2 million cars and trucks.

Despite the German government’s call for companies to diversify their operations in Asia and away from China, Volkswagen continues to invest in the country in partnership with local companies.

Volkswagen is the leading producer of internal combustion engine vehicles in China, but has lost ground to domestic automakers in the fast-growing electric car market. Last year, Volkswagen unveiled a “in China for China” strategy that it plans to expand, including developing technology and software specifically for consumers there, including in-car karaoke.

The automaker’s problems in North America are somewhat different. After years of trying to become a bigger player specifically in the United States, it remains far behind American automakers such as General Motors and Ford Motor and Asian companies such as Toyota and Hyundai.

Volkswagen remodeled its Chattanooga, Tennessee plant last year to produce electric vehicles, and now produces the ID.4 sport utility vehicle there. On Monday, Volkswagen said it had chosen a site in Ontario for a new battery factory. And earlier in March, the company said it would build a plant in South Carolina to make pickup trucks and SUVs that will be sold under the moribund Scout brand.

In Europe, a key element of the company’s focus is its first battery factory, a €2 billion factory that grows out of a field in Salzgitter, Germany, near the company’s Wolfsburg headquarters. The new plant is located behind a site where Volkswagen has produced engines for more than 50 years and is set to become the automaker’s main supplier of battery cells.

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