Volkswagen

The Volkswagen logo atop the automaker’s headquarters in Wolfsburg, Germany.

Volkswagen will ramp up spending on electric vehicles and automated driving by 36% as the world’s largest automaker challenges rivals to keep pace with an aggressive shift into the post-combustion era.

The new five-year budget for investment in hybridization, electric mobility and digitalization totals 60 billion euros ($66 billion), compared with 44 billion euros previously, the Wolfsburg-based manufacturer said Friday. The spending amounts to 12 billion euros a year.

“We are resolutely pressing ahead with the transformation of the Volkswagen Group and focusing our investments on the future of mobility,” Chairman Hans Dieter Poetsch said in a statement after the supervisory board approved the plan.

The sharp increase in spending after just one year reflects the increasing pressure on automakers amid the disruptive technology shift and the strains to meet increasingly stringent pollution regulations. Slowing markets make financing the investment tougher.

“The idea of growing out of problems only grows the problem,” Arndt Ellinghorst, a London-based analyst with Evercore ISI, said in a note. VW’s approach is a contrast to “peers who are tightening their belts in light of tougher end markets and increasing variable costs.”

Volkswagen lowered its global vehicle delivery forecast last month as demand waned in key markets including China, its biggest sales region. The manufacturer had reduced output plans by 900,000 cars and is prepared to cut further to avoid bloated inventories.

“In light of the worsening economic situation, we are also working on increasing our productivity, our efficiency and our cost base,” Chief Executive Officer Herbert Diess said in the statement. “We intend to take advantage of economies of scale and achieve maximum synergies.”

Bloomberg’s Chiara Remondini contributed to this report.

Thursday, December 12, 2019
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