Volkswagen prepares to face Tesla and Chinese automakers

The Volkswagen group will devote until 2027 two thirds of its total investments of 180 billion euros to the electric and connected car, up 13% compared to its previous multi-annual investment plan

Volkswagen prepares to face Tesla and Chinese automakers

The Volkswagen group will devote until 2027 two thirds of its total investments of 180 billion euros to the electric and connected car, up 13% compared to its previous multi-annual investment plan. These expenses will be used in particular for the construction of battery cell factories, under the leadership of its dedicated subsidiary PowerCo, and for securing the raw materials necessary for the manufacture of batteries. "By 2030, PowerCo is expected to generate an annual turnover of more than 20 billion euros", explains the group. Two battery factory projects are underway in Sweden and Germany, and another project will officially start on Friday in Valencia, Spain.

The group announced Monday the opening in 2027 of a fourth factory in Canada, without immediately confirming other plans for Europe, where six factories were initially planned. Europeans fear that multinationals will question their investments on the continent to make them in the United States where Joe Biden's great climate and inflation plan (IRA) provides billions in subsidies for green industries. Like other manufacturers, Volkswagen is putting pressure on Brussels so that the European Union also adopts a vast aid plan for climate-friendly technologies. "We will look at the industrial conditions that will be offered to us and the energy prices [...] because these are not competitive," said Oliver Blume, who maintains his "clear commitment to continue [production] in Europe" .

Volkswagen says it is aiming for an 11% share of electric vehicles in its deliveries this year, compared to 7% in 2022. The world's second largest carmaker estimates that it can reach a 20% share by 2025. year 2022, Volkswagen was the leader in electric sales in Europe, with 352,000 vehicles sold, but Tesla delivered 1.31 million cars worldwide compared to 572,100 for the German rival.

Volkswagen wants to focus its investments on North America and on increasing its sales in China, traditionally its first market, where the German group is unable to establish itself in the segment of electric vehicles in the face of competition from manufacturers. premises and Tesla. During his visit to China last month, Oliver Blume was "impressed" by the development of the electric vehicle market, he said Tuesday at the annual press conference, his first as CEO of the group whose he took control in September 2022. China currently accounts for some 40% of the group's sales, which overwhelmingly sells traditional engines there, having ensured 16% of the automotive market share in the country last year. "We are very strong on combustion engines but we are still lagging behind on electric vehicles," Blume acknowledged.

It is also to meet Chinese demand that the group is increasing its investments in integrated software. China will be a pioneer in the implementation of autonomous driving, estimates VW, which announced in October an important partnership with Horizon Robotics, a Chinese specialist in artificial intelligence, to strengthen itself in this field. In addition to these investments, there is also spending "in the latest generation of combustion engines". These will peak "in 2025, and then decline continuously."

In 2022, the group posted a slight increase in net profit of 2.6% over one year, to 15.9 billion euros, despite a 7% drop in its vehicle deliveries. The profitability of sales before exceptional items increased slightly to 8.1%, thanks to higher prices and sales of more expensive models, benefiting from better margins. The ten-brand group expects to sell 9.5 million vehicles this year, a full million more than in 2022. "Bottlenecks in the supply chain should gradually ease in 2023," allowing Volkswagen to honor the "high" level of its order book.