Volkswagen has announced its intention to uphold investment levels over the next five years, despite implementing a multi-billion euro cost-saving program. According to a report by German newspaper Handelsblatt, the majority of the investment will be directed towards the development of new electric models.
“Most of the money” will finance new electric models, said three individuals familiar with the matter to Handelsblatt. The carmaker plans to invest around 180 billion euros through 2028, consistent with the figures set earlier for the period up to 2027. This decision comes contrary to the expectations of investors interviewed by the business newspaper, who anticipated investment cuts due to the austerity program.
CEO Oliver Blume aims to allocate the majority of the funds towards the development, production, and marketing of new electric models. Volkswagen finds itself in a challenging position as the transformation of the traditional car manufacturer incurs substantial costs, and margins are already lower compared to competitors. Furthermore, sales of current electric models are stagnating, evidenced by production pauses at the all-electric car plant in Zwickau. Despite efforts, VW struggles to replicate the previous success of combustion engines with its electric vehicles, even in key markets like China.
However, the management's decision to maintain investments is not without controversy. The Supervisory Board has approved the expenditure, albeit with conditions attached. “Part of the sum will be linked to certain ‘implementation levels' in the so-called ‘performance programme' of the VW brand,” according to company circles cited by Handelsblatt.
The objectives of the savings program include achieving approximately ten billion euros in savings by 2026 and increasing the return on sales from 3.4 to 6.5 percent. While the exact criteria set by the Supervisory Board remain undisclosed, it is known that the “implementation status” must reach 80 percent of planned measures.
Notably, details of Volkswagen's five-year plan have only recently come to light, deviating from the company's traditional practice of announcing such plans following the November planning round. A VW spokesperson declined to comment on the negotiations, citing the “quiet period” preceding the annual results presentation.