VW Accelerates Electric Car Effort With $40 Billion Investment -- Update

By Max Bernhard and Nathan Allen Features Dow Jones Newswires

Volkswagen AG plans to invest EUR34 billion ($40 billion) by the end of 2022 in a bid to become the market leader in electric and autonomous vehicles, the latest move by a major auto company to embrace what could be the future of the car.

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The German auto giant said Friday that most of the investment would be directed toward making electric and hybrid version of its models. The company has previously stated that it aims to electrify its entire portfolio by 2030.

Auto companies the world over are ramping up plans for electric vehicles in response to tougher emissions regulators and the prospect that some countries could eventually ban the internal combustion engine.

"We are laying the foundation for making Volkswagen the world's number-one player in electric mobility by 2025," Chief Executive Matthias Müller said. "The entire automotive industry is facing fundamental changes in the coming years, which will provide great opportunities, but also require us to put in tremendous efforts.

The spend on electric and self-driving cars is part of a broader direct-investment program worth EUR72 billion over the next five years. Neither figure includes about $12 billion that Volkswagen and its partners plan to invest in electric cars in China, as disclosed Thursday.

As part of its pivot toward electrification, Volkswagen said it would remodel a plant in Zwickau, Germany, to exclusively manufacture electric vehicles. It also said it would concentrate production of its Passat vehicles at its Emden site and Golf models at its Wolfsburg factory.

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Despite the size of its investment plans, Volkswagen retained its target of lowering capital expenditure and development cost ratios to 6% of sales by 2020. For the third quarter of 2017, Volkswagen's automotive division reported a capex ratio of 6.3% and a research-and-development ratio of 6.6%.

The company consistently out spends its peers in capital investment and development expenditure -- both in absolute terms and as a proportion of sales -- according to analysts at Evercore ISI. In 2016 Volkswagen spent EUR26.5 billion compared with EUR19 billion at Toyota Motor Corp. and EUR14.6 billion at Daimler AG.

Write to Max Bernhard at Max.Bernhard@dowjones.com

(END) Dow Jones Newswires

November 17, 2017 10:24 ET (15:24 GMT)