VW Doubles Down On Electric Vehicle Target Amidst Strained Profits

Volkswagen AG
An employee holds a Volkswagen logo in a production line at the Volkswagen plant in Wolfsburg, Germany (Photo: Reuters)

In an attempt to become one of the largest electric vehicle manufacturers in the world, Volkswagen AG has announced that it will be increasing its electric vehicle target by as much as 50 percent in the coming years. The renewed drive to build more electric cars comes at a time when the current world's largest carmaker is experiencing a slump in its overall sales.

According to the company, they are now making plans to build more than 22 million electric vehicles over the next 10 years. The Germany-based manufacturer's new target is significantly higher than its original goal of 15 million electric vehicles. By comparison, Volkswagen's target is significantly higher and more ambitious than GM's goal of building 1 million electric vehicles each year by 2026.

The company also plans to emulate Tesla in the way it will be building its future vehicles. Volkswagen's chief executive officer, Herbert Diess, explained during the recently held Capital Market's Day that building fully-cars as opposed to electric and combustion drivetrains is a much more efficient approach. Diess also added that they will not be following other companies who are building hybrid vehicles as going the fully-electric route will be the most efficient way for them cut their CO2 emissions.

Transitioning to a fully electric production line will likely be an expensive endeavor for the company. However, given VW's scale and finances, the company may be able to pull it off. Most other carmakers that lack VW's capacity have opted to build electric vehicles that work in conjunction with their currently combustion models. This approach allows for lowered manufacturing costs since some components will be made through the same production lines.

Volkswagen, on the other hand, is planning to completely retool a large number of its production plants to specifically manufacture brand new electric platforms. The move will likely be a big gamble for the company, which is currently suffering from strained revenues caused by high expenditure on electric drivetrain technologies. To cut down on cost, the company is reportedly in negotiations with Ford Motor Corp for a collaborative effort to develop technologies for commercial electric vehicles and autonomous driving systems.

Diess had told investors at the company's recent annual earnings press conference that VW is aiming to take the leap like no other manufacturer in the industry. VW will reportedly invest more than US$49 billion in the next few years to develop electric and connected vehicles. VW had already introduced a number of electric models as part of its 70-model plan until 2028. This includes the recently unveiled Porsche Taycan and the Audi E-Tron.

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