Electrification push will exceed the original $32 billion budget
Herbert Diess, the CEO of the Volkswagen Group, has admitted developing a broad electric car range is more expensive than the company first thought.
“The burden for our company, such as the cost of bringing to market electric cars, will be higher than expected,” Diess said in an interview published in Volkswagen’s internal company newsletter and seen by Bloomberg. Diess stated this partially down to “some of our competitors … making more progress”.
The company had originally budgeted €20 billion ($32 billion) to bring 16 fully electric models to market by 2022 and make changes to nine factories to enable them to produce electric cars. The Volkswagen Group has also committed to introducing 300 electrified models and variants by 2030.
Among the confirmed electric vehicles are the Porsche Taycan and Audi e-tron crossover, both targeting the luxury market. At the mainstream-end of the spectrum, Volkswagen has confirmed it will build the Golf-size ID hatch and the Kombi-like ID Buzz.
The CEO didn’t state how much he expects the group’s electrification push will now cost. He warned the company may need to cut costs elsewhere in order to keep to its current plan.
Although the company managed to lift its overall operating margin to 7.4 per cent in 2017, up from 6.4 per cent in 2016, Diess warned Volkswagen needed “higher profits to finance our future”.
Diess said a margin of 4.0 per cent would be the absolute minimum, while margins of between 5.0 and 6.0 per cent would mean there would be some funds for future investments, with figures between 7.0 and 8.0 per cent necessary for Volkswagen to remain “crisis ready”.
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