Volkswagen raises profit target as it outlines EV battery plans

Wolfsburg — Volkswagen (VW) raised its long-term profitability target on Tuesday in a sign of the German carmaker’s growing confidence in managing the shift to electric and self-driving vehicles.

Presenting its strategy until 2030, Europe’s largest carmaker also said it expected half of its global vehicle sales to be battery-powered by that date — joining rivals in setting ambitious goals to move on from the era of combustion engines.

The targets come ahead of a huge package of climate policies the EU plans to announce on Wednesday, possibly including a de facto ban of petrol-based vehicles from 2035.

At VW, which aims to overtake Tesla as the world's largest electric vehicle (EV) maker by 2025, battery EVs accounted for just 3% of global sales in 2020.

“We set ourselves a strategic target to become global market leader in electric vehicles — and we are well on track. Now we are setting parameters,” said CEO Herbert Diess, whose contract was extended last week until 2025.

After reporting blowout first-half earnings, Volkswagen said it expected the strong performance of its existing business to help fund €150bn of investments by 2025 in areas such as batteries and software.

It added the synergies between technologies and brands, which span budget Seats and Skodas to upmarket Audis and Porsches, also gave it the confidence to increase its target for operating return on sales for 2025 to 8%-9% from 7%-8%.

‘Scale and strength’

“We view the combination of scale and financial strength as unrivalled,” said Marc Decker, head of fund management at Merck Finck. “Against this backdrop it’s just a matter of time until the Wolfsburg-based company will become the world leader in the market for electric mobility.”

VW fleshed out plans to build six large battery factories in Europe by 2030, choosing China’s Gotion High-Tech as a partner for its planned Salzgitter factory in Germany and looking at Spain as a location for another plant.

The plans mark the latest step by the world’s second-largest carmaker after Toyota to reinvent itself following a 2015 scandal over rigged emissions tests for diesel engines that has so far cost it more than €32bn.

Announced via trailers and management tweets last week, the strategy day tried to recreate the success of VW’s Power Day in March, which caused its shares to surge and briefly made it Germany’s most valuable firm.

While still up 42% in the year to date, the shares have dropped 14% from their March highs, reflecting the challenge to convince investors that fat profits from combustion engine cars can be replaced with those from EVs.

Carmakers have set an array of goals for an electric future. Last week, Stellantis said it was aiming for more than 70% of sales in Europe and over 40% in the US to be low-emission vehicles by 2030. That includes hybrid vehicles, as well as all-electric battery cars.

VW said in June it would stop selling petrol-guzzlers in Europe by 2035 and somewhat later in China and the US as part of its shift towards EVs.

Reuters