U.S. Markets closed

VW Secures $25 Billion Battery Supplies in Electric-Car Surge

Chris Reiter, Christoph Rauwald
An electric charging socket sits on the Volkswagen AG (VW) e-Golf electric automobile production line at the VW factory in Wolfsburg, Germany, on Thursday, March 8, 2018. Diesel will see a renaissance in the not-too-distant future because people who drove diesels will realize that it was a very comfortable drive concept, VW Chief Executive Officer Matthias Mueller said at the Geneva International Motor Show earlier this week.

Volkswagen AG secured 20 billion euros ($25 billion) in battery supplies to underpin an aggressive push into electric cars in the coming years, putting pressure on Tesla Inc. as it struggles with production issues for the mainstream Model 3.

The world’s largest carmaker will equip 16 factories to produce electric vehicles by the end of 2022, compared with three currently, Volkswagen said Tuesday in Berlin. The German manufacturer’s plans to produce as many as 3 million electric cars a year by 2025 is backstopped by deals with battery suppliers in Europe and China.

More from Bloomberg.com: Mueller Weighs Putting Off Trump Obstruction Decision

With the powerpack deliveries secured for its two biggest markets, a deal for North America will follow shortly, Volkswagen said. In total, the Wolfsburg-based automaker has said it plans to purchase about 50 billion euros in batteries as part of its electric-car push, which includes three new models in 2018 with dozens more following.

From next year, the 12 brand group will roll out a new electric vehicle “virtually every month,” Chief Executive Officer Matthias Mueller said at the company’s annual press conference. “This is how we intend to offer the largest fleet of electric vehicles in the world.”

More from Bloomberg.com: Tillerson Urges Patience on Trump-Kim Meeting Specifics

Pressure has intensified on Volkswagen to overhaul its lineup. Its diesel-cheating scandal, which erupted in September 2015, sparked a backlash over the technology, including potential urban driving bans . Diesel is key to efforts to meet tighter environmental targets because of its fuel efficiency, even though it emits smog-causing nitrogen oxides. Volkswagen reaffirmed its backing for the technology with Mueller calling it “part of the solution,” even as Toyota Motor Corp. pulls diesel cars from its lineup in Europe, the main market for the vehicles.

Volkswagen plans to rein in spending amid the push to ramp up electric-car production. Development spending declined 3.9 percent to 13.1 billion euros in 2017, equivalent to 6.7 percent of sales. The company reiterated a target to lower that ratio to 6 percent by 2020.

More from Bloomberg.com: Trump Blocks Broadcom Takeover of Qualcomm on Security Risks

As part of Volkswagen’s 20 billion-euro push into electric cars it’s setting up a standalone I.D. sub-brand for battery-powered vehicles. The first model will be the Neo hatchback that goes on sale in 2020. The Audi luxury marque is set to begin deliveries later this year of the all-electric E-Tron SUV .

More from Bloomberg.com

Read VW Secures $25 Billion Battery Supplies in Electric-Car Surge on bloomberg.com