Volkswagen Dives Deep Into Electrification, Announces $50 Billion Investment

At the expense of profits, Volkswagen is splurging on its future-self by increasing its originally planned investment by 25 percent.

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Volkswagen is scheming an all-out industry assault in order to become the next leader on the electric forefront. On Friday, the automaker said that it would invest $50 billion (44 billion euros) in order to develop electric cars and other new technologies.

CEO Herbert Diess spoke to the press on Friday, describing the tactic as an "electric offensive" which enables the company to dump massive amounts of cash into the research and development of its upcoming electric vehicles. Altogether, the manufacturer will guarantee funds of up to $50 billion in order to further its reach into the overall electrification of its fleet, as well as software-assisted driving systems and connected services.

The newly revised investment represents a 25 percent overall increase in the brand's previously announced allocation of $40 billion. In recent days, VW has also announced allocations of $4 billion for its new vw.OS cloud computing platform, as well as a proxied $2 billion towards vendor-agnostic charging infrastructure through Electrify America as reparation for its 2015 Dieselgate scandal.

Notably, the large investment, which is set to be distributed throughout 2023, will undoubtedly stymie bottom-dollar earnings, something which Volkswagen is already struggling to improve given the number of sales sacrificed in Europe due to new fuel economy standards. However, Diess isn't worried about the up-front spending.

"Volkswagen must become more efficient, more productive, and more profitable in order to finance the high expenditure in the future and in order to stay competitive," said Diess, acknowledging the "spend-money-to-make-money" mentality VW is taking towards investing in electrification.

Previously, VW identified Tesla as its biggest silent competitor and given the Model 3's sharp uptick in popularity, the Germans are ready to take off the gloves. Tesla has been largely recognized as a key driving force of the industry's shift toward electrification due to its widely available fast-charging infrastructure, always-connected over-the-air features, and software-assisted driving system, Autopilot, making the U.S.-based manufacturer extremely desirable for those seeking out the latest and greatest technology. Now, VW will use one of its biggest influencers to create a competitive ecosystem: cold hard cash.

Production for VW's first I.D.-branded electric car is set to begin in 2020, with at least 50 all-electric models being in production by 2030. The automaker says that it has sourced enough batteries to build 50 million electric cars, of which it anticipates selling upwards of one million annually by 2025.

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