Frankfurt: Volkswagen AG has earmarked €50.2 billion ($64.7 billion) of investments over the coming three years as it accelerates plans designed to help it become the world’s largest car maker by the end of the decade.
As the company strives to replace Toyota Motor Corp as the No.1 auto maker globally, it is expanding its presence outside Europe, building or planning new factories in markets such as China, Mexico and Russia.
It is also stepping up investments in products and technology to consolidate its lead over stricken western European peers, which have slowed or shelved whole programmes, engine technologies and platform revamps while grappling with high costs in a shrinking European market.
“Despite the challenging economic environment, we are investing more than ever before to reach our long-term goals,” the German group’s chief executive Martin Winterkorn said in a statement on Friday.
Volkswagen’s total spending equals an average €16.7 billion for the three years from 2013 through 2015. Last year, it had said it would invest €62.4 billion in the five years from 2012 until 2016, or an average €12.5 billion per year.
The Wolfsburg, Germany-based company said its capital expenditure would total €39.2 billion, or 6-7% of sales for the period, broadly in line with analyst estimates.
That means Volkswagen will invest almost as much in property, plants and equipment over the next three years as analysts see Toyota and US rival General Motors Co spending together, according to Thomson Reuters StarMine.
Volkswagen’s strong sales outside Europe have allowed it to offer cut-price deals and swell its share of the battered European market to almost a quarter.
Yet while the multi-brand group is less exposed to austerity-hit Europe than rivals Peugeot SA and Fiat SpA, finding the cash to achieve its goal is becoming harder and it has to balance keeping a tight rein on short-term costs with the need to develop new products.
Volkswagen, which had a net cash cushion of €9.2 billion at the end of September, will spend €10.6 billion on development, for instance on the introduction of new models and the design of alternative drives.
More than two thirds of overall investments will go towards increasing vehicle efficiency and the development of more environmentally friendly products.
In addition, €9.8 billion will be invested in new production facilities and products at joint ventures in China. As these joint ventures are not consolidated, their spending is not part of Volkswagen’s overall plans. Reuters