Volkswagen doubles EV share target while maintaining margin goal
Volkswagen AG’s main brand doubled its forecast for the share of purely battery-powered cars in Europe to 70% by the end of the decade while sticking to a nearer-term target to improve profitability.
Electric cars will also make up more than 50% of sales in China and the US then, VW said Friday in a statement. VW’s namesake brand will still deliver an operating profit margin of at least 6% as of 2023, even as battery cars generate slimmer returns and the company steps up the pace on investments in electrification and digital services.
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The transformation of the marque is key for Europe’s largest automaker as it accounts for roughly half of global deliveries. Its profitability trails other mass-market rivals as it is saddled with significant development costs for components used by other VW group brands. PSA Group divisions were the envy of the industry before the French manufacturer combined with Fiat Chrysler to form Stellantis NV earlier this year.
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VW brand had a negative return on sales after the first nine months last year with an operating loss of 1 billion euros ($1.2 billion) as the pandemic shut factories and cut sales. In 2019, the margin was 4.3%.
Faster Pace
VW’s rollout of electric cars is gaining steam. The ID.3 hatchback, the first vehicle from its dedicated EV compact-car platform, went on sale in 2020. It’ll be followed by the all-wheel drive ID.4 SUV and the ID.5 crossover this year. The seven-seater ID.6 X will go on sale in China in the fall. Plans for a smaller EV below the ID.3 priced at around 20,000 euros have been pulled forward by two years to 2025.
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VW’s electric transformation got a boost this week when UBS Group AG analysts said the ID.3 and VW’s EV platform was competitive with Tesla Inc. on key metrics including cost, energy density and efficiency. All electric cars from the VW brand will have “a positive margin" from the start, Brandstaetter said.
Among the broad electric shift, key models like the Golf, Tiguan and Passat will get a combustion-car successor to help finance the move toward EVs. The brand is investing about 16 billion euros in areas including electric mobility and digitization through 2025.
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