A VW Buzz electric cargo truck. (Photographer: Krisztian Bocsi/Bloomberg)

VW to Spend $50 Billion on New Tech to Take On Rivals

(Bloomberg) -- A year after throwing down the gauntlet with an unprecedented outlay on next-generation mobility, Volkswagen AG has boosted its five-year plan by more than a quarter to 44 billion euros ($50 billion).

With the new record through 2023, the German carmaker is highlighting the huge stakes in moving from the combustion era into an electric future. Volkswagen said it now plans more than 50 fully-electric models on the road by 2025, more than any other manufacturer. The push, including next year’s Porsche Taycan, is part of keeping old rivals and new competitors like Tesla Inc. and Uber Technologies Inc. at bay.

VW to Spend $50 Billion on New Tech to Take On Rivals

Volkswagen is aiming “to speed up the pace of innovation,” said Chief Executive Officer Herbert Diess, signing off on his first planning round. Keeping up profitability targets would require “extreme hard work,” he told reporters after the manufacturer’s supervisory board agreed on the plan.

Since taking the helm in April, Diess has set about revamping the 12-auto brand behemoth to better meet future challenges, pledging to rein in bloated costs and boost economies of scale. A more agile setup is critical as the industry deals with slowing economic growth, trade barriers and the uncertainty of a post-Brexit Europe. German peers Daimler AG and BMW AG have cut their outlook, while Toyota Motor Corp. and General Motors Co. reported strong results.

VW declined as much as 3.4 percent, reversing earlier gains, to the lowest intraday level in more than two weeks. The shares were 2.4 percent lower at 144.16 euros at 3:56 p.m. in local trading, taking losses this year to 14 percent.

The spending represents about a third of Volkswagen’s five-year budget on capital goods such as property and plants. Despite the increase, the world’s biggest carmaker stuck with a target of lowering capital expenditures to 6 percent of sales from 2020. To achieve this goal, VW’s plants, spanning some 120 facilities globally, will reduce costs. Last year, the ratio shrank to 6.4 percent.

Most Profitable

VW’s scale means it’s is in a better position than anyone else to spread costs for electric cars across more vehicles, Diess said, putting the manufacturer on course to become the most profitable electric carmaker.

Talks with Ford Motor Co. to cooperate on light commercial vehicles are progressing well, and could extend into teaming up on autonomous deliveries as well, but will exclude business strategy, marketing an pricing, Diess said. He denied speculation the future partnership could be a prelude to cross-shareholdings or a merger.

“That was never the goal of these talks,” Diess said. “Ford remains a competitor.”

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