VW could keep investment levels constant

The carmaker will invest around 180 billion euros up to and including 2028, three people familiar with the matter told the German newspaper Handelsblatt. That corresponds to what was set a year earlier for the period up to 2027. Investors interviewed by the business newspaper had expected that Volkswagen would cut investments due to the austerity programme.

Group CEO Oliver Blume intends to use most of the money to finance the development, construction and marketing of new models with electric drives. VW is in a difficult situation: the transformation of the traditional car manufacturer with its fixed structures is costing a lot of money, and margins are already lower than those of the competition. At the same time, sales of the current electric models are stagnating, as demonstrated by the production pauses at the all-electric car plant in Zwickau. Even in China, the most important single market, VW cannot match the former success of the combustion engine with its EVs. At the same time, young and dynamic competitors from the US and China are shaping developments in the market – Tesla, BYD, Nio, and Xpeng, to name a few. That has already led to an unusual cooperation between the VW brand and Xpeng.

However, the management’s plan to keep up investments is not uncontroversial either. According to the report, the Supervisory Board has already authorised the expenditure, but with several conditions attached. “Part of the sum will be linked to certain ‘implementation levels’ in the so-called ‘performance programme’ of the VW brand, according to company circles,” writes Handelsblatt. Management must thus meet the savings targets to have the full investment budget at its disposal – otherwise, it will be cut. An interesting detail: the investments apply to the Group, but the “performance programme” is a project of the core brand VW Passenger Cars under brand CEO Thomas Schäfer. Schäfer is considered a close confidant of Group CEO Blume, but the Supervisory Board has linked the brand’s savings programme to the Group’s investment planning. According to insiders, the members of the Supervisory Board from the Porsche family pushed for this in particular.

The core objectives of the “performance programme” are clear: savings of around ten billion euros by 2026, and the return on sales should increase from 3.4 to 6.5 per cent. The exact factors to which the Supervisory Board’s requirements are linked are not known. However, the “implementation status” will be 80 per cent of the planned measures. According to people familiar with the matter, this 80 per cent has probably already been reached for the measures that will take effect in 2024 and 2025, but not yet for the measures for 2026.

The fact that details of the Wolfsburg-based company’s five-year plan are only now becoming known is quite unusual. The Group traditionally holds its “planning round” in November, in which investments and the distribution of current and upcoming models across the plants for the next five years are determined. VW also completed the 2023 planning round in November but – unlike previously – did not comment on the results afterwards.

According to the media report, “details of the completed investment planning round will be communicated at the latest at the annual press conference in mid-March.” Due to the annual press conference, a VW spokesperson did not want to comment on the negotiations when asked by the Handelsblatt. Hardly any information relevant to the capital market is published during the so-called “quiet period,” the run-up to the presentation of the annual results.

handelsblatt.com (in German)