An ambitious expansion plan worth multi-billion euros would form the basis of German car maker Volkswagen to transform itself into the most profitable electric car manufacturer of the world, said Chief Executive of the car maker Herbert Diess.
According to the executive, VW will explore possible areas of cooperation with US car maker Ford apart from apportioning a project worth almost 44 billion euros (US$50 billion) for the development of electric cars, autonomous driving technologies and new mobility services by 2023.
According to Diess, the initial focus of its partnership with Ford would be on commercial vehicles and the possible outline of the deal is hoped to be inked out by the end of the year. The question of a merger with Ford is not under consideration, he said and added that VW does not have any intention of taking up any stake in the US car manufacturer.
Diess said at a news conference in Wolfsburg, VW’s headquarters that the company would be able to bring down the costs of production and ultimate price of electric vehicles to the level of diesel vehicles manufactured by it currently.
“Very emotional vehicles, high economies of scale, I think we will be the most profitable company in electric vehicles,” Diess said.
In what is the most significant strategy shift towards low polluting vehicles since the diesel cheating scandal in 2015, the supervisory board of VW, the largest carmaker of Europe, passed on the capital expenditure for mass production of electric vehicles that is expected to have far reaching consequences.
According to the plan, three of its plants in Germany would be redesigned for electric vehicles and will also consider partnerships for electric car batteries and with rivals.
The plan also entail enhancement of production at its factories by 2025 by 30 per cent where greater number of vehicles form the various brands of the company would be produced on the same production line. VW also wants to reduce the costs of research and development ratio at the group’s automotive division to six percent of revenues starting 2020.
“Volkswagen must become more efficient, more productive and more profitable in order to finance the high expenditure in the future and stay competitive,” Diess said.
While there is a concern among employee unions that there would be requirement of lower number of employees in the assembling of battery driven cars, labour unions of the company who sit on 50 per cent of the seats at the company’s supervisory board, also need to ratify the planned expenditure for the creation of a global production capacity of 1 million electric vehicles by 2025.
Manufacturing of petrol and diesel engine vehicles in Germany accounts for employment of about 436,000 industrial jobs.
There is a threat to jobs because of the proposed plan simply because of the much lesser number of parts that are required to construct an electric car. According to analysts at ING, compared to the 1,400 components in the motor, exhaust system and transmission present in the combustion engine car, there are only 200 components in the battery and motor of an electric car.
(Adapted from ChannelNewsAsia.com)