WOLFSBURG -- Volkswagen Group is reorganizing production at its German factories to further the automaker's goal of transforming itself into a leading force in electric cars.
VW will spend more than 34 billion euros ($40 billion) on EVs, autonomous driving and new mobility services by the end of 2022, the company said in a statement on Friday.
Production of electric cars for European markets will largely be focused at VW's factory in Zwickau, Germany. The factory will build EVs based on VW's MEB electric-car platform after a 1-billion-euro investment.
Production will start with the VW brand's I.D. electric car range in 2019 with the first I.D. vehicle, a Golf-sized hatchback, launching on the market in 2020. The plant will also build battery-powered models for sister brands Audi, Seat and Skoda. In 2020, the production volume will be about 100,000 vehicles.
Electric cars for VW's largest market, China, will be produced locally. VW said on Nov. 16 that it will spend 10 billion euros by 2025 to develop and manufacture all-electric and plug-in hybrid vehicles in China.
VW Group's Skoda brand said it will build a full-electric car at its factory in Mlada Boleslav in the Czech Republic to launch in 2020.
MEB-based cars will have a 400 km (240 mile) to 600 km (360 mile) range, along with rapid charging capabilities. They will be priced to match comparable diesel cars, VW said.
Production of the VW Golf and Passat currently done in Zwickau will be relocated to the company's factories in Wolfsburg and Emden. VW is investing 2.9 billion euros in Wolfsburg to pool production of the next-generation Golf at the plant. At Emden, the investment to concentrate Passat production there from the end of 2018 will be about 1.1 billion euros.
VW also said it will invest in its German parts factories, with 750 million euros planned in Brunswick, 1.5 billion euros in Kassel and more than 800 million euros in Emden.
With the investment, VW is seeking to defend its status as the world's biggest automaker as new competitors such as Tesla and Uber Technologies emerge as part of the disruptive shift.
"With the planning round now approved, we are laying the foundation for making Volkswagen the world's No. 1 player in electric mobility by 2025," VW Group CEO Matthias Mueller said in the statement.
'Disciplined' spending
The plan puts Volkswagen on track to spend about 14.4 billion euros a year, compared to recent annual spending levels of 12 billion euros.
VW will be "more disciplined" with its spending and do better at leveraging the company's enormous scale to save costs, Mueller said.
The drive to get spending under control follows years of poor budget discipline and bloated costs squeezed returns. Mueller reiterated a pledge to reduce capital expenditures to 6 percent of sales by 2020. The spending ratio ballooned to 6.9 percent last year.
"Investors should welcome a commitment toward more contemporary investment discipline," Arndt Ellinghorst, a London-based analyst at Evercore ISI, said in a note. "So far this year, VW has made good progress" with strong cash flow and investment likely to come in below 6.6 percent of revenue this year.
Bloomberg and Reuters contributed to this report
