As it ramps up plans to sell at least 3 million electrified vehicles annually by 2025, Volkswagen has announced orders for $25 billion worth of batteries and battery components – dwarfing the spending plans of all-electric competitor Tesla.
Longer-term, VW said it plans to more than double that total as it prepares to offer some form of electrified drivetrain for every vehicle in its line-up – including dozens of all-electric models. It plans to roll out its first three long-range battery-electric vehicles this year, including offerings from its Volkswagen, Porsche and Audi brands. It also will launch a new sub-brand, Volkswagen I.D., which will include in its portfolio the all-electric Buzz, a modern take on the automaker’s iconic Microbus.
Among all 12 brands in the Volkswagen Group family, CEO Matthias Mueller said that there will be new battery-powered models launched “virtually every month,” as the new program ramps up, adding that “This is how we intend to offer the largest fleet of electric vehicles in the world.”
While mainstream models, such as the VW Golf, Audi A6 and even the Bentley Bentayga SUV will add electrified powertrain options, VW also plans to introduce some unique, all-electric models, such as the I.D. Buzz, as well as the new Audi E-tron SUV and Porsche Mission E sport car. The latter two vehicles will come to market over the coming year.
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The aggressive plan poses some potentially serious challenges for Tesla, industry analysts caution. While the California automaker plans to add a number of new models by early in the coming decade – including a compact SUV, an electric pickup and a battery-powered semi truck – it “doesn’t have the deep pockets” to compete with companies like Volkswagen, cautioned David Sullivan, a senior analyst with AutoPacific Inc.
Unlike Tesla, which has been setting up the world’s largest lithium-ion battery plant, the Gigafactory, near Reno, Nevada, VW will rely on outside suppliers for its technology, Mueller said during a news conference in Berlin.
“Building up expertise and mastering the technology does not necessarily imply that we want to start large-scale assembly of batteries ourselves,” the CEO explained. “Others can do it better than we can.”
VW is by no means the only automaker making a push into electrification. General Motors already builds the Chevrolet Bolt EV and will add three more long-range BEVs by early in 2019, it announced last autumn. During an energy conference in Texas last week, Chairman and CEO Mary Barra announced GM will significantly expand production of the Bolt this year due to increasing demand. Like VW, the Detroit automaker relies on outside sources – primarily Korea’s LG Chem – for its batteries.
(Click Here to see more about VW confirming plans for I.D. Crozz electric SUV.)
Among the companies VW will turn to for batteries is Chinese producer CATL.
Tesla’s bet on building its own batteries has proven problematic. Production snags at the Gigafactory have contributed to the unexpectedly slow ramp-up of production of its Model 3 and, in turn, that has generated significantly higher losses than expected in recent months.
Tesla has promised to get up to its original production target by mid-year. Meanwhile, it has laid out plans to spend $17.5 billion on battery technology during the same period as VW’s $25 billion investment.
While Tesla was conceived as an all-electric brand, VW was slow to embrace battery technology, only shifting focus after acknowledging in 2015 that it had rigged two diesel engines to illegally pass emissions tests. It has since stopped selling diesel-powered vehicles in the U.S. under the VW brand. And it is expected to sharply reduce its range of diesel offerings, though no clear phase-out timetable has yet been announced.
(To see more about VW’s I.D. Vizzion hitting showrooms by 2022, Click Here.)
Some analysts and investors question VW’s hefty spending on electrification, and Mueller acknowledged that the company will need to improve its business operations to “generate the revenue we will need for our enormous future investments.”