With a goal of becoming the world’s largest automaker in mind, Volkswagen AG plans to invest $114 billion to upgrade factories and roll out an array of new vehicles for its more than a dozen different brands.
The maker, currently third in global sales behind Japan’s Toyota Motor Co. and Detroit-based General Motors, has set a goal of being the world’s “leading” automaker by 2018, the period covered by the latest plan – which calls for an investment of 84.2 billion euros. At the same time, the maker hopes to reduce spending on property, plants and equipment by 500 million euros annually.
“We will continue to invest strongly in our innovation and technology leadership,” Chief Executive Officer Martin Winterkorn said in a statement. “This will give us extra power on our way to the top.”
That “means completely revamping the Group’s range of vehicles and engines,” it explained. “In the area of powertrain production, new generations of engines will be launched offering additional enhancements to performance, fuel consumption and emission levels. In particular, the Group will continue to press ahead with the development of hybrid and electric motors.”
One of the reasons for this approach is to massively increase economies of scale. But in a statement, VW also noted that it is trying to cope with increasingly stricter regulations being enacted around the world, such as the new Euro 6 emissions standards.
Over two-thirds of the planned investment will go into product, according to Volkswagen, perhaps no surprise considering the wide range of brands the maker has added over the years.
VW is already in the process of a major transformation of its product portfolio. It has developed a range of flexible new platforms that can be shared by a wide range of different models. The MQB “architecture,” for example, will be used on products as diverse as the new Golf, the production version of the recent CrossBlue crossover concept, and various other models from Seat, Skoda and Audi.
VW has doubled its factory count to 105 as it entered new emerging markets, expanded its market-leading operations in China, the world’s largest automotive market. The maker plans to invest another 18.2 billion euros, through 2018, in its Chinese joint ventures, a figure not included in the latest projection.
Volkswagen’s investment binge comes even as it cuts costs elsewhere, the maker stating in September that it needed to commit to more “belt-tightening.” Earnings have continued to lag key rivals this year, but the maker recently announced a goal of boosting its profit margin to 6% of sales, a 70% increase from 2012 levels, according to Chief Financial Officer Hans Dieter Poetsch.