Volkswagen shows confidence in electric future with higher margin goal

Volkswagen raised its long-term profitability target on Tuesday in a sign of the German automaker's growing confidence in managing the shift to electric and self-driving vehicles.

Presenting its strategy until 2030, Europe's largest carmaker also said it expected half of its global vehicle sales to be battery-powered by that date - joining rivals in setting ambitious goals to move on from the era of combustion engines.

The targets come ahead of a huge package of climate policies the European Union plans to announce on Wednesday, possibly including a de facto ban of petrol-based vehicles from 2035.

At Volkswagen, which aims to overtake Tesla as the world's largest electric vehicle (EV) maker by 2025, battery EVs accounted for just 3% of global sales last year.

"We set ourselves a strategic target to become global market leader in electric vehicles - and we are well on track. Now we are setting parameters," Chief Executive Herbert Diess said.

Volkswagen ID.4 electric SUV

After reporting blow-out first-half earnings last week, Volkswagen said it expected the strong performance of its existing business to help fund 150 billion euros ($178 billion) of investments by 2025 in areas such as batteries and software.

It added the synergies between technologies and brands, which span budget Seats and Skodas to upmarket Audis and Porsches, also gave it the confidence to increase its target for operating return on sales for 2025 to 8-9% from 7-8%.

Carmakers have set an array of goals for an electric future. Last week, Stellantis said it was aiming for more than 70% of sales in Europe and over 40% in the United States to be low-emission vehicles by 2030. That includes hybrid vehicles, as well as all-electric battery cars.

Volkswagen said last month it would stop selling gas-guzzlers in Europe by 2035 and somewhat later in China and the United States as part of its shift towards EVs.