VW ID.3

Herbert Diess, Volkswagen CEO, unveils the VW ID.3 electric car in Frankfurt, Germany, this past Septermber.

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 $66 billion.

“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 reflects the increasing pressure on automakers amid the disruptive technology shift and the strains to meet increasingly stringent pollution regulations.

“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.”

Volkswagen shares recently rose 0.9% in Frankfurt, boosting gains for the year to 31% and valuing the company at 90.8 billion euros.

The German auto giant has been under pressure since the 2015 emissions-cheating scandal. The aftershocks continued Friday, with the company naming Markus Duesmann as head of the Audi brand. He will replace Bram Schot, who took over following the arrest of Rupert Stadler amid an ongoing German investigation into Audi’s past rigging of diesel-engine software.

Since the diesel crisis, Volkswagen has accelerated its development of electric cars. The spending budget includes a 10% increase in investment for battery-powered vehicles. Tesla Inc. added urgency this week by announcing plans to build a factory on VW’s home turf.

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