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Investing.com — Volkswagen AG VZO O.N. (ETR:VOWG_p) outlined a sweeping €180 billion (€1=$1.0708) plan to invest in battery production and boost performance in key auto markets like the U.S. and China over the next five years.
In its annual report on Tuesday, the German carmaking giant said more than two-thirds of this investment will flow into “digitization and electrification.” The company has set a target of 50% electric vehicle sales by the end of the decade, and is setting its sights on optimizing its software offerings as cars become ever more connected to other devices.
“As early as 2025, every fifth vehicle sold worldwide is expected be one with an all-electric drive,” VW said in a statement.
The group added that a major reason for the investment uptick stems from the €15B it has set aside for the construction of cell factories by the battery start-up PowerCo, as well as expenditures for securing raw materials needed to produce batteries. By 2030, PowerCo is seen generating annual sales of over €20B. Investment in traditional combustion engines will also peak in 2025 before they begin to decline “continuously.”
VW is attempting to use this push into electrification to expand its market share in North America to 10% by 2030, up from its current level of 4%. Meanwhile, the company is keen to grow its presence in China, the world’s largest auto market, noting that the country’s importance will rise over the next ten years, “especially in the field of electromobility.”
But analysts flagged that performance was weak in VW’s eponymous brand during the fourth quarter, with the earnings before interest and tax margin at the unit slipping to 1% from 3.8% in the prior three months. Analysts at RBC Capital said the segment’s results were hit in part by the expiry of German government incentives for plug-in hybrids at the end of 2022, as well as knock-on effects from the war in Ukraine.
Shares in VW fell on Tuesday and have dropped by more than 9% over the past one-year period.
