Economy

Volkswagen to invest $27 bn in core brand until 2022

Volkswagen to invest $27 bn in core brand until 2022

"We are laying the foundation for making Volkswagen the world's No. 1 player in electric mobility by 2025", Chief Executive Matthias Mueller told a news conference.

The news came a day after Volkswagen announced a 34 billion euros spending program aimed to strengthen its position as a maker of electric cars.

China has decreed that all manufacturers must sell the equivalent of 10% electric vehicles by 2019.

The company had been slow to embrace electric cars and self-driving technology until it was swept up two years ago in a scandal over cheating on diesel emissions tests.

Volkswagen will embark on the electrification or hybridization of every one of its approximately 300 brand models, including models from Audi, Porche, Seat and Skoda which the VW Group owns.

The group said its total investments in electric vehicles capacity and projects will amount to about 72 billion euros by 2022, confirming an earlier Reuters story. To date, 1.9 billion euros of efficiency savings have already been achieved, corresponding to 96 percent of the target set for 2017.

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VW will be "more disciplined" with its spending and do better at leveraging the company's enormous scale to save costs, Mueller said.

At the previous budget round a year ago, VW pledged to cut overall spending on factories, equipment and technology to 6 percent of automotive sales by 2020 from 6.9 percent in 2015. The spending ratio ballooned to 6.9 percent previous year.

"Investors should welcome a commitment towards more contemporary investment discipline", said Evercore ISI analyst Arndt Ellinghorst who has an "outperform" rating on VW shares. VW is investing $3.4 billion in Wolfsburg to pool production of the next-generation Golf at the plant.

Most of that sum, around 14 billion euros, will be spent in Germany, Volkswagen said, adding that one of the key measures included a 1 billion euro injection to transform the carmaker's Zwickau plant into a pure e-mobility facility.

Production of the Volkswagen Golf and Passat in Zwickau will be relocated to Wolfsburg and Emden, Volkswagen said, where investments will be €2.9bn and €1.1bn respectively.