VW Group planning to spend $106 billion over the next five years into new vehicles

Article by Christian A., on November 24, 2014

Volkswagen Group is planning to spend EUR85.6 billion ($106 billion) over the next five years into new vehicles, technology and plants as part of its bid to overtake Toyota Motor Corp. as the largest carmaker in the world. VW’s investment plan entails a hike in average annual spending on auto operations to around EUR17.1 billion annually, compared to EUR16.8 billion spent on its current five-year budget.

VW Group chief executive Martin Winterkorn said in a statement that the carmaker will continue to incur high development costs as a result of high innovation pressure and increasing demands on the auto industry.

Analysts see the announcement as an indication that VW is not about let it go of its ambition to become the global auto sales leader even as it implements an austerity drive.

Reuters quoted a source within the carmaker as saying that VW Group is seeking cost savings of around EUR10 billion across the group – core VW, Skoda and Seat mass-market brands and the Audi and Porsche premium marques.

In July 2013, Winterkorn told employees that he is expecting for EUR5 billion in efficiency gains at VW brand by 2017 that should trim the profit gap with its rival. Arndt Ellinghorst of Evercore ISI said in a note to investors that VW Group’s efficiency program has yet to affect the carmaker’s capital expenditure planning has not become a victim of the company's efficiency program.

VW’s joint ventures in China are not consolidated, which means their results are excluded in the company’s latest figure. These JVs plan to hike their investments to EUR22 billion through 2019, which means the group’s five-year budget should reach EUR107.6 billion. [source: Bloomberg.com]

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