(Bloomberg) -- Volkswagen AG Chief Executive Officer Matthias Mueller announced sweeping plans to build electric versions of all 300 models in the group’s lineup as the world’s largest automaker accelerates the shift away from combustion engines and tries to draw a line under the emissions-cheating scandal.
Speaking on the eve of the Frankfurt auto show, the CEO laid out the enormity of the task ahead, vowing to spend 20 billion euros ($24 billion) to develop and bring the models to market by 2030 and promising to plow another 50 billion euros into the batteries needed to power the cars.
“We have got the message and we will deliver," Mueller said in his speech to hundreds of guests at the carmaker’s event in the German financial capital. “The transformation in our industry is unstoppable. And we will lead that transformation.”
Catching up in electric vehicles is key to the German manufacturer’s effort to move beyond its diesel-emissions crisis that erupted two years ago and meet tightening emission rules across the globe. China over the weekend became the latest country to announce plans to phase-out fossil-fuel powered vehicles, following the lead of the U.K. and France. The move by China, the world’s biggest auto market, is sure to accelerate a global shift to electrics.
Volkswagen is throwing the fire power of its 12 brands behind the push, aiming to catch up with the likes of Tesla Inc. and transform from a battery-vehicle laggard into a leader. Tesla has started to roll out the $35,000 Model 3 to broaden its appeal and stem billions of dollars in losses. Leaving its upmarket niche is putting the Californian startup on direct collision course with traditional automakers like VW, Toyota Motor Corp. and Nissan Motor Co. as falling battery costs are forecast to make electric cars more affordable in coming years.
VW, Daimler AG and BMW AG, are all accelerating electric-vehicle plans to react to slumping sales of diesel models amid the fallout from VW’s cheating scandal. With their big cars, German automakers are particularly reliant on diesel in their home market of Europe and had been banking on the fuel-efficient engines to help meet ever tougher emissions rules that will tighten further early next decade.
Underscoring the enormity of the shift taking place in the industry, Mueller said VW will need the equivalent of at least four gigafactories for battery cells by 2025 just to meet its own vehicle production. At 50 billion euros, the CEO announced one of the largest tenders in the industry’s history for the procurement of batteries.
"Financially we’re very robust," Mueller said in a Bloomberg TV interview. "We’ll generate the money we need to make these investments."
Economies of Scale
By 2025, VW aims to have 50 purely battery-powered vehicles and 30 hybrid models in its lineup, with a goal of selling as many as 3 million purely battery-powered cars by then. The transformation will pick up speed after that to reach the 2030 goal as economies of scale and better infrastructure help bring down prices and accelerate sales.
The automaker in Frankfurt is giving the public its first glimpse of the coming overhaul of the product portfolio. The namesake brand is presenting the latest design iteration of the fully-electric I.D. Crozz compact crossover and the I.D. Neo hatchback -- both come to market in 2020.
Luxury brand Audi, the group’s largest earnings contributor, will start selling its first all-electric SUV in 2018 and add two more purely battery-powered vehicles in the next three years. The premium-car brand is slashing spending to free up 10 billion euros to develop an electric-car lineup that will comprise as many as 12 models in 2025.