VW boosts five-year investment

Volkswagen Group is to invest €84.2 billion in its Automotive Division over the coming five years. Over two-thirds of the total investment amount will continue to flow into increasingly efficient vehicles, drives and technologies, as well as environmentally friendly production.

This is the result of the group’s investment planning for 2014 to 2018 discussed by the Supervisory Board of Volkswagen Aktiengesellschaft at its meeting today.

“We will continue to invest strongly in our innovation and technology leadership, despite the uncertain economic environment. This will once again significantly boost the Group’s competitiveness and safeguard its future. I am convinced that this will give us extra power on our way to the top,” said Prof. Dr. Martin Winterkorn, chairman of the board of management of Volkswagen Aktiengesellschaft.

Investments in property, plant and equipment in the Automotive Division will amount to €63.4 billion. Average annual investments in property, plant and equipment will be around €0.5 billion less than in the planning approved in 2012 for the period from 2013 to 2015.

“In times like these, our disciplined cost and investment management will remain a cornerstone of our activities,” said Winterkorn. The lower level of investment in property, plant and equipment is due among other things to the postponement of construction projects and capacity optimisation. Investments in products and technologies remain unaffected by the decline. The ratio of investments in property, plant and equipment (capex) to sales revenue will remain at a competitive level of between six and seven per cent in the period from 2014 to 2018,” he added.

Alongside investments in property, plant and equipment, the plans also include capitalised development costs of €19.5 billion and other investments including for financial assets to the tune of €1.3 billion. The increase in capitalised development costs as against previous planning is due to upfront investments in connection with the Group’s CO₂ targets.

More than half of the investments in property, plant and equipment (almost 60 per cent) will be made in Germany.

“The amount being invested in Germany is a strong testament to the fact that our home locations will continue to play a key role in the globally positioned group going forward,” said Winterkorn. “At Volkswagen, we are clearly committed to Germany as a manufacturing and development location. At the same time, we are also stepping up our investments in the markets outside Europe so as to further increase our global presence and capability.”

At €41.2 billion (roughly 65 per cent), VW will spend a large proportion of the total amount to be invested in property, plant and equipment in the Automotive Division on modernising and extending the product range for all its brands. The main focus will be on new vehicles and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and related components.

This will allow Volkswagen to continue its model rollout with a view to tapping new markets and segments. The high level is due among other things to upfront investments relating to the changeover to Euro 6, which means completely revamping the Group’s range of vehicles and engines.

                                     Engines

In the area of powertrain production, new generations of engines will be launched offering additional enhancements to performance, fuel consumption and emission levels. In particular, the Group will continue to press ahead with the development of hybrid and electric motors.

In addition, VW will make cross-product investments of €22.2 billion over the next five years. These include spending to expand capacity. Other investment focuses are press shops and paint shops, reflecting the company’s high quality targets and the continuous improvement of its production processes. Investments outside production are mainly planned for the areas of development, quality assurance, sales, genuine parts supply and information technology.

The joint ventures in China are not consolidated and are not included in the above figures. They will invest a total of €18.2 billion in new production facilities and products in the period from 2014 to 2018. These investments will be financed from the joint ventures’ own funds.           ∎