VW to invest more than €34bn in electric and self-driving cars

Volkswagen will invest more than €34bn into electric and self-driving cars over the next five years as Europe’s largest carmaker steps up its efforts to develop new technology in the rapidly changing industry.

“We are reinventing the car,” chief executive Matthias Müller said on Friday.

As part of VW’s shift towards battery cars, the Wolfsburg-based group will convert its production plant in Zwickau, where 7,700 employees build VW Golfs and Passats, into a pure-play emobility plant.

The announcement backs up VW’s commitment given a year ago to become the world’s market leader in electric mobility by 2025.

The group unveiled a plan in September to make electric versions of all 300 models in the 12-brand group’s line-up.

Mr Müller expects that in 2025, one in four new vehicles sold will be pure electric vehicles, between 2m and 3m cars per year. “The entire automotive industry is facing fundamental changes in the coming years,” he warned on Friday.

Rival carmakers are pursuing an even more radical shift towards electric vehicles.

Volvo Cars this summer announced that from 2019 onwards, it would only sell electric and hybrid cars.

VW accelerated its push into electric vehicles after it admitted to US regulators that it had over years manipulated emissions data of diesel vehicles.

The entire automotive industry is facing fundamental changes in the coming years

The company paid tens of billions of fines and compensation payments, its long-term chief executive Martin Winterkorn resigned and its share price collapsed. Earlier this month, shares in VW again reached the pre-crisis level.

The plan unveiled on Friday puts VW on track to spend about €14.4bn a year, compared with €12bn at the moment.

In 2016, the group’s research and development budget was the biggest of any global company, according to an ISI Evercore study published in November 2016.

Investors have long criticised VW’s bloated budget for research and development and capital spending.

Frank Witter, chief financial officer, has promised to bring down research and development and capital expenditure. He said on Friday the new, lower level of about 12 per cent of sales will be reached from 2020 onwards.