VW plans new EV factory in Germany to counter Tesla

FRANKFURT -- Volkswagen plans to build a new state-of-the-art car factory close to its global headquarters in Wolfsburg, Germany, to raise its game as the opening of Tesla's gigafactory near Berlin draws closer.

The plant would build a flagship full-electric car code-named "Trinity” designed to close the technology gap to Tesla and challenge traditional rivals with highly automated driving features.

The factory would produce about  250,000 cars annually and would be less complex than retooling existing operations, VW brand chief Ralf Brandstaetter told reporters in Wolfsburg on Tuesday.

A final decision could be made next month when key stakeholders review the group’s five-year spending plans.

VW said it aimed for a production time of 10 hours per vehicle for the Trinity model, similar to how long it will take Tesla to assemble the Model 3 at its first European factory in Gruenheide near Berlin.

Constructing an all-new plant is an alternative to adapting the existing Wolfsburg plant to produce the Trinity model, which VW says limits the possibilities for more radical changes to the manufacturing process.

"That's why we are planning greenfield construction: efficient and without limitations by existing structures," Brandstaetter said. "That way we are gaining time and space to gradually modernize the main factory in a far-reaching way and raise production there, too, to a new level," he added.

VW did not provide a cost estimate for the factory, which still requires approval by the automaker's supervisory board.

Talks over how to keep Wolfsburg competitive in the shift to electric vehicles has seen tensions rise between VW Group CEO Herbert Diess and the company’s powerful labor leaders. Diess urged workers last week to prepare for faster reforms to keep pace with Tesla as the electric car leader ramps up output at its new plant just outside of Berlin next year.

Diess warned that Tesla is swiftly improving quality and might radically shrink production time to just 10 hours per car at the Gruenheide plant. VW’s main electric car factory in Zwickau, eastern Germany, needs more than 30 hours per vehicle, which should be reduced to 20 hours next year, according to Diess. 

Brandstaetter said VW is targeting about 10 or 12 hours per vehicle, as well by cutting down on vehicle options for buyers.

A new factory would offer more efficient logistics and cause less interference for the production of the Golf and Tiguan models at the current Wolfsburg plant, he said.

VW brand will build the successors of the two high-volume models in Wolfsburg and plans to add a seven-seater SUV. Two of Wolfsburg’s four existing assembly lines could switch to making electric cars around 2027, Brandstaetter said.

Key stakeholders approved the Trinity project last year to build VW’s first high-volume car on new standardized underpinnings that span the entire product range of the group. The car will also have a new software stack for so-called Level 4 highly automated driving. 

Bloomberg and Reuters contributed to this report