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Volkswagen Group to invest $106 billion over next 5 years in Automotive Division

The Volkswagen Group will invest a total of €85.6 billion (US$106 billion) in new models, innovative technologies and its global presence in its Automotive Division over the coming five years. Around two-thirds of the total investment amount will flow into increasingly efficient vehicles, drives and more environmentally friendly production.

Investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs (capex) in the Automotive Division will amount to €64.3 billion (US$80 billion), on a level with the planning approved in the previous year for the period from 2014 to 2018. At €41.3 billion (US$51.3 billion)—roughly 64%—the Group will spend most of the total capex in the Automotive Division on modernizing and extending the product range for all its brands. The main focus will be on expanding the SUV range—in particular in the A/A0 class—as well as on modernizing part of the light commercial vehicle portfolio.

At the same time, investments are also planned in new vehicles and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and related components. This will allow the Volkswagen Group systematically to continue its model rollout with a view to tapping new markets and segments.

In the area of powertrain production, new generations of engines will be launched offering additional enhancements to performance, fuel consumption and emission levels. The Group will also continue to press ahead with the development of hybrid and electric drives.

In addition, the Company will make cross-product investments of €23.0 billion (US$29 billion) over the next five years. These include spending to expand capacity, a new Crafter plant in Poland and the new Audi plant in Mexico. Other investment focuses are press shops and paintshops, reflecting the company’s high quality targets and the continuous improvement of its production processes. Investments outside production are mainly planned for the areas of development, quality assurance, sales, genuine parts supply and information technology.

The joint ventures in China are not consolidated and are therefore not included in the above figures. They will invest a total of €22.0 billion (US$27 billion) in new production facilities and products in the period from 2015 to 2019. These investments will be financed from the joint ventures’ own funds.

We will continue to invest in the future to become the leading automotive group in both ecological and economic terms – with the best and most sustainable products. Development costs will remain high in the future as a result of high innovation pressure and increasing demands on the automotive industry from CO2 legislation. As a Group, we have the expertise and financial strength to continue to extend our technology leadership and to reach our goals for 2018.

For us, efficiency means not least that capex in the Automotive Division will remain at the same level over the entire planning period—despite increasing demands and the additional growth we have planned.

—Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG

The capex ratio will be at a competitive level of between six and seven percent in the period from 2015 to 2019.

In addition to spending on capex, the plans also include capitalized development costs of €21.9 billion (US$27 billion) and proceeds from asset disposals of €0.6 billion, net of investments in financial assets. The capitalized development costs include upfront investments in connection with complying with environmental requirements and in expanding and upgrading the model portfolio.

More than half of the capex spending (around 56%) will be made in Germany.

Comments

HarveyD

That's one of the thing to do to become Number ONE by 2018 or so.

Patrick Free

Thinking that with so HUGE investments WW group has still not managed to become competitive in BEV space with a small company in California called TESLA... Is inspirational.
And what was announced and rumored during LA Motor Show tells us they are still plannig to end short in 2017/2018 time frame.
Are they serious ?

Davemart

@Patrick:
In their GAAP accounts which they are compelled to show after all the flannel, Tesla made a loss of $75 million in the quarter.
That is around $9,600 lost for every car they delivered.

No doubt VW could build plenty of BEVs if they wanted to lose 10 grand on every one they sold.

Account Deleted

Davemart you can also read in that statement that
1) Tesla makes a gross profit of 252 million USD or 32k USD in gross profit per car sold (=252/7,785).
2) Tesla spend 136 million on R&D or 17.5k USD per car sold (=136/7785). For comparison VW spend about 520 USD per car sold on R&D!
3) Tesla spend 155 million USD on Selling, general and administrative of which none goes to direct marketing but most goes to building the global distribution network, service network and supercharger network or about 20k USD per car sold (=155/7785).

Tesla's production is now at 1000 cars per week or 12000 per quarter. It should grow to 18000 units in the 4th qtr of 2015. That would mean about 550 million in gross profit in that qtr and by then the current losses due to huge R&D and investments in selling, general and administrative should be covered plentifully. In fact, sales just need to hit 12000 quarterly before the net loss is over at current R&D etc. Tesla has enough on the book to take a loss for a while and an even bigger one in the cash flow account that also includes even larger investment in plant, property and equipment.

IMO Tesla's biggest worry is that they will get competition from another Model S and Model X made by a competitor among the old automakers. I do not see that coming for the time being. For one thing the probable competition does not have the required battery factory and neither does anyone else. You can't build such a large battery factory without the press knowing years in advance.

Tesla's latest qtr account and letter to shareholders

http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-14-403635&CIK=1318605

http://files.shareholder.com/downloads/ABEA-4CW8X0/3655259848x0x791902/d7b8cc04-9c3e-4216-9ce3-7fb4d7e0c00b/Q314%20SHL%20Final.pdf

Patrick Free

@Davemart
I'm not surprised that such a fast growing company who has started this year their GigaFactory, and who is currently installing thousands of 135KW SuperChargers In Europe and the US, that will last for many years as they have been rightly sized up-front, so the ultimate 500M # 160KWH battery expected in a few years could still 80% charge on them in less than 1H,... Can make the decent GAAP loss you mentionned. And I'm not worried by that considering the value of their shares... No issue to finance that.
But long term, the economies of scale should work a lot better for them than for the other technos, bet it. Outside the battery, that they are taking care of with GigaFactory securing a huge advance and independance on this crucial part, the rest of the car will cost so much less that current alternative cars, as volumes grow up, after the initial investment have been recovered.... Think about it : No big central ICE engine, no big central gearbox, no big central transmission (Count the number of German factories to close the day they follow). Only one engine per axis, and just cables in between them and the battery... When they will make millions bet how much each will cost ?
The more the German wait to match Tesla on the cars and on the SuperChargers network, the more it will become impossible to come back tomorrow as time has shrunck with Tesla acceleration of their Superchargers network. They will get locked out from their historical high end market. I'm European, and I've been a BMW new cars customer for # 25 years. Seing BMW, as well as Audi and Porsche in WW group missing that BEV/PHEV race is painful. But since they managed to screw every step one after the other, planning everything for failure in that space, I think they deserve it. Take their new PHEVs this year, all wrongly set the same way, with no decent "all electric mode", just a sort of electric turbo on top of a big ice engine, pulling nothing and kidding EU regulations, with meaningless <10KWH batteries (Requiring 2 x charges per day for my local commutes hence 3K cycles will last 5 to 6 years and resale value will be Zero) and ridiculous 100HP electric motors when put on a Cayenne eHybrid of 2.5 Tons ! And this week Audi saying they are planning for 2017/2018 a pure EV with only 280KM of EV range which Tesla already makes with 85KWH battery.... This is all planning for failure, so result is already known. They will all fail.
After last Month Paris Motor show I almost decide to wait another year and buy a Tesla Model X in 2016 and forget petrol in my car forever, as well as my preferred German brands, just not serious on EVs. Too bad for them.

Davemart

@Patrick:

I'm not even going to go there with some giant paragraph which we are supposed to parse.

If it is not presented in some reasonably concise and readable fashion, I will pass.

ToppaTom

Does Tesla have a lead equivalent to Toyota's?

Will they; when and IF the planned GigaFactory is actually completed?

Toyota has the lion's share of the HEV/BEV market, and that market is still below 4%.

Tesla is a small fish in a small pond.

HarveyD

Posters should not downgrade Tesla because Elon Musk may very well become the Henry Ford of the 21st century or the father of the mass produced extended range AWD EV.

We should instead, praise the gentleman and wish him continued success with the current new S-85D and the next 20+ models.

Tesla Model III may become the equivalent to Ford's Model-T or Model-A of future EVs.

Tesla is pushing-forcing the majors to have another look at the mass production of electrified vehicles to replace current polluting ICEVs and that's very positive for the whole world.

Brotherkenny4

Davemart has been presented with numerous clear explanations on this topic and yet refuses to admit that GAAP is not a true method of determining real profit. Placing all R&D and factory costs in the year that they occur is not a reality. It's clearly the same kind of gripe the FOX goons and others used to claim that GM was losing 200K per Volt. Of course we know that is not true. Factories and research cost money and are purchased up front and profits made later, and one amortizes the factory over a decade or more, not in the same year it is built. The weirdest thing is that it is done here where investors seek info and they should be fully aware of this issue, that factories and research can be a big upfront cost.

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