March 13, 2018 / 9:36 AM / in 3 months

Volkswagen assigns $25 billion in battery orders in electric car drive

BERLIN (Reuters) - Volkswagen (VOWG_p.DE) has picked partners to provide battery cells and related technology worth around 20 billion euros ($25 billion) for its growing electric car program, adding further pressure on U.S. pioneer Tesla (TSLA.O).

Until its “dieselgate” emissions scandal was revealed two and a half years ago, Europe’s largest automaker had been slow to embrace electric cars.

But the fraud prompted a strategic shift, while advances in batteries and a global fight against pollution are raising pressure on carmakers to adopt zero-emission alternatives.

Volkswagen (VW) said on Tuesday it had secured battery technology deliveries for Europe and China, where it sells 80 percent of its vehicles, and will select a supplier for North America soon.

While Tesla’s much-anticipated Model 3 sedan has already missed some key production targets, VW plans to expand assembly of zero-emission cars to 16 plants globally through the end of 2022 from three at present.

“We have pulled out all the stops over the past months to implement the Roadmap E swiftly and resolutely,” Chief Executive Matthias Mueller said at a news conference, referring to the electric vehicle (EV) program.

VW’s emissions scandal, new Chinese quotas for electric cars and tightening rules on carbon dioxide (CO2) emissions in Europe are causing automakers to focus on green cars and self-driving technology.

VW has a goal to sell 3 million electric cars per year across the group by 2025 and to offer an electric version of each of the group’s 300 models by 2030.

Slideshow (8 Images)

LG Chem (051910.KS), Samsung (005930.KS) and Chinese battery maker Contemporary Amperex Technology Co Ltd (CATL) will deliver batteries to VW, which has no plans to start producing powerpacks by itself, Mueller said.

“Building up expertise and mastering the technology does not necessarily imply that we want to start large-scale assembly of batteries ourselves,” the CEO said. “Others can do it better than we can.”

Although grappling with billions of euros in costs and fines for dieselgate, VW has pledged to spend 34 billion euros on EVs, autonomous driving and new mobility services by the end of 2022, one of the most ambitious plans in the industry.

Separately, the German carmaker reiterated guidance for higher vehicle sales and revenue this year and for a group operating margin of 6.5-7.5 percent after 7.4 percent last year.

In an interview with Reuters TV, Mueller denied top management had a pessimistic view on VW’s business prospects in 2018, but said potential bottlenecks as carmakers rush to get models through new so-called WLTP lab tests for emissions and fuel consumption were causing uncertainty.

“We have to deal with WLTP this year,” he said. “It’s simply too early to speculate whether this will be an especially good year or a normal year.”

($1 = 0.8114 euros)

Reporting by Andreas Cremer and Reuters TV; Editing by Maria Sheahan and Mark Potter

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