VW Just Gave Tesla a $25 Billion Battery Shock
The world’s largest carmaker will equip 16 factories to produce electric vehicles by the end of 2022, compared with three currently, Volkswagen said Tuesday in Berlin.
Volkswagen AG secured 20 billion euros ($25 billion) in battery supplies to underpin an aggressive push into electric cars in the coming years, ramping up pressure on Tesla Inc. as it struggles with production issues for the mainstream Model 3.
The German manufacturer’s plans to build as many as 3 million of the cars a year by 2025 is backstopped by deals with suppliers including Samsung SDI Co., LG Chem Ltd. and Contemporary Amperex Technology Ltd. for batteries in Europe and China.
Volkswagen’s battery plans compare to Tesla’s $17.5 billion worth of purchase obligations as of last year, including $15.4 billion in deals through 2022, primarily related to buying lithium-ion cells from Panasonic, according to a recent filing.
Its diesel-cheating scandal, which erupted in September 2015, sparked a backlash over the technology, including potential urban driving bans.
As of next year, the 12-brand group will roll out a new battery-powered model “virtually every month,” Chief Executive Officer Matthias Mueller said at the company’s annual press conference.
With the powerpack deliveries secured for its two biggest markets, a deal for North America will follow shortly, Volkswagen said.
As part of Volkswagen’s 20 billion-euro push into electric cars, it’s setting up a standalone sub-brand for battery-powered vehicles.
Even with the battery-purchase deals, Volkswagen’s power-supply issues are still far from over.
The manufacturer predicts an operating margin this year of between 6.5 percent and 7.5 percent of revenue, compared with 7.4 percent in 2017.
In total, the Wolfsburg-based automaker has said it plans to purchase about 50 billion euros in batteries as part of its electric-car push, which includes three new models in 2018 with dozens more following.
Development Spending Even with its push to ramp up electric-car production and avoid penalties from tighter environmental regulations, Volkswagen plans to rein in expenditures.
“Naturally, we are looking to continue our operating business success in 2018,” said Mueller.
“This is how we intend to offer the largest fleet of electric vehicles in the world.” Diesel Quandry Pressure has intensified on Volkswagen to overhaul its lineup.
Development spending declined 3.9 percent to 13.1 billion euros in 2017, equivalent to 6.7 percent of sales.
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