Volkswagen aims to produce almost 50 per cent more electric cars than it previously targeted

World’s largest automaker now plans to build 22 million vehicles over the next 10 years

Herbert Diess, chief executive officer of Volkswagen AG (VW), left, speaks beside Frank Witter, chief financial officer of Volkswagen AG (VW), during the automaker’s annual news conference in Wolfsburg, Germany, on Tuesday, March 12, 2019.  Volkswagen’s profitability for the main VW, Audi and Porsche brands fell last year amid strains for the transition to electric cars and the German carmaker’s push for a deeper overhaul. Photographer: Krisztian Bocsi/Bloomberg

Volkswagen aims to produce almost 50 per cent more electric cars than it previously targeted, boosting a bet that has already strained profit margins.

The world’s largest automaker now plans to build 22 million vehicles over the next 10 years, compared with an earlier goal of 15 million. Return on sales fell last year at the company’s three core brands VW, Porsche and Audi as trade wars, a Chinese slowdown and new emissions testing in Europe added to costs.

Chief Executive Officer Herbert Diess is pushing forward with the plan to electrify VW’s fleet and overtake Tesla, even though buyers staying on the fence mean the payoff could be years away. The German carmaker already has the industry’s most aggressive e-car plan and is in advanced talks with Ford Motor to work together on autonomous driving and other areas.

“The supertanker is picking up speed,” Chief Executive Officer Herbert Diess said Tuesday in speech notes while presenting full-year earnings. “We are aligning Volkswagen with e-mobility like no other company in our industry.”

Mr Diess, like other automaker CEOs, is under pressure to find savings while he funnels more cash toward the company’s biggest transformation in decades. VW is spending  €44 billion (Dh181.9bn) through 2023 on electric and connected cars. Keeping profitability level this year from 2018 will be an achievement given the US-China trade spat and falling demand in China, VW’s biggest market, Mr Diess said in a Bloomberg TV interview.

The stock has declined 5.7 per cent in the past year, compared with a 21 per cent drop in the Stoxx Europe 600 Automobiles & Parts Index.

VW is also making progress on a plan for a partial share sale in trucks unit Traton. A date will be agreed “in the foreseeable future” with VW weighing up market conditions “in the next days,” Mr Diess said in speech notes. The division is valued at as much as  €30bn.

To help gain scale and save costs, VW is opening up its dedicated electric-car platform to others. The company is also in talks to deepen a cooperation with Ford beyond working together on vans, adding Tuesday that discussions about further possible collaborations in e-mobility and autonomous driving are at an advanced stage. VW may take a stake in the self-driving car project with Ford, Mr Diess said. It’s also considering acquisitions of software suppliers.

VW last month already presented preliminary earnings that met expectations.

For the Audi E-Tron and the Porsche Taycan, VW’s first two battery cars that are part of a 70-model onslaught until 2028, VW said it has received 20,000 reservations each -- with Porsche boosting planned production because of high demand.

As VW works toward the costly dawn of the electric era, the company is under pressure to deliver on a pledge to overhaul the 12-brand behemoth ranging from the world’s most expensive car to ship engines. Mr Diess’s plan to become more agile and save costs is facing growing discontent among the ranks of VW’s powerful labor representatives, who’ve previously derailed plans on non-core asset sales and deeper cost cuts.

Separately, legacy issues from the 2015 diesel-emissions cheating continue to crop up. The company has earmarked  €29bn to deal with the fallout of its biggest corporate scandal, an increase of €1bn from a year ago. German prosecutors have opened a new administrative probe connected to an investigation into market manipulation by Mr Diess, Chairman Hans Dieter Poetsch and former CEO Martin Winterkorn over allegations they informed markets too late about the diesel case and its impact.