Volkswagen Investing in Hopes of Becoming World's Largest Auto Maker

Friday, 23 Nov 2012 10:57 AM


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Germany's Volkswagen plans to invest 50.2 billion euros ($64.7 billion) in its automotive business in the coming three years as it strives to become the world's largest car maker this decade.

"Despite the challenging economic environment, we are investing more than ever before to reach our long-term goals," Chief Executive Martin Winterkorn said in a statement on Friday.

Of the overall figure earmarked for 2013 to 2015, 24.7 billion euros will go toward modernizing and extending the product range for Volkswagen's (VW) 12 brands.

While the multi-brand group is less exposed to austerity-hit Europe than rivals PSA Peugeot Citroen and Fiat, finding the cash to achieve its goal is becoming harder and it has to balance keeping a tight rein on short-term costs with the need to develop new products.

Stepping up investments on products and technology is seen allowing VW to consolidate its lead over stricken Mediterranean peers, which have slowed or shelved whole vehicle programmes, engine technologies and platform revamps while grappling with high fixed costs in a shrinking European market.

VW's strong sales elsewhere have allowed it to offer cut-price deals and swell its share of the battered European market to almost a quarter.

As the company strives to replace Toyota Motor Corp as the world's No.1 auto maker no later than 2018, it keeps increasing its presence outside Europe, building or planning new factories in markets such as China, Mexico and Russia.

Under the new investment plan, some 14.5 billion euros will go toward cross-product investments such as a new plant for Audi in Mexico, expansion of Porsche's Leipzig plant and increased production of automatic gearboxes, VW said.

Last year, VW had said it would invest 62.4 billion euros in the five years from 2012 until 2016.

In addition, 9.8 billion euros will be invested in new production facilities and products at joint ventures in China from 2013 to 2015. As these joint ventures are not consolidated, their spending is not part of VW's overall plans.

© 2014 Thomson/Reuters. All rights reserved.

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