The Volkswagen Group has announced it will invest a total of 84.2 billion euros ($114 billion) in its Automotive Division over the coming five years, investment mostly aimed at vehicle efficiency.
Over two-thirds of the total investment will go toward increasingly efficient vehicles, drives and technologies, as well as environmentally friendly production, said VW. This is the result of the group’s investment planning for 2014 to 2018 discussed by the Supervisory Board of Volkswagen Aktiengesellschaft at its meeting last Friday.
“We will continue to invest strongly in our innovation and technology leadership, despite the uncertain economic environment. This will once again significantly boost the group’s competitiveness and safeguard its future. I am convinced that this will give us extra power on our way to the top,” said Prof. Dr. Martin Winterkorn, chairman of the Board of Management of Volkswagen Aktiengesellschaft.
Investments in property, plant and equipment in the Automotive Division will amount to 63.4 billion euros ($85.9 million). Average annual investments in property, plant and equipment will be around a 500 million euros ($680 million) less than in the planning approved in 2012 for the period from 2013 to 2015.
“In times like these, our disciplined cost and investment management will remain a cornerstone of our activities,” said Winterkorn.
The lower level of investment in property, plant and equipment is due among other things to the postponement of construction projects and capacity optimization, explained VW. Investments in products and technologies remain unaffected by the decline.
According to Bernd Osterloh, Chairman of the General and Group Works Councils, “Volkswagen’s focus on future viability and sustainability also extends to its investments — and this applies to both products and production. This is good for our locations and good for jobs. It is a positive signal, particularly in light of the difficult market environment.”
At 41.2 billion euros (55.5 million – roughly 65 percent), the group will spend a large proportion of the total amount in the Automotive Division on modernizing and extending the product range for all its brands. The main focus will be on new vehicles and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and related components.
VW explained this will allow the Volkswagen Group to systematically continue its model rollout with a view to tapping new markets and segments. The high level is due among other things to upfront investments relating to the changeover to Euro 6, which means completely revamping the Group’s range of vehicles and engines.
In the area of powertrain production, new generations of engines will be launched offering additional enhancements to performance, fuel consumption and emission levels, said VW. In particular, the Group will continue to press ahead with the development of hybrid and electric motors.
In addition, the company said it will make cross-product investments of 22.2 billion euros over the next five years. These include spending to expand capacity. Investments outside production are mainly planned for the areas of development, quality assurance, sales, genuine parts supply and information technology.
The joint ventures in China are not consolidated and are therefore also not included in the above figures, per VW. They will invest a total of 18.2 billion euros ($24.7) in new production facilities and products in the period from 2014 to 2018. These investments will be financed from the joint ventures’ own funds.