VW Spending $11.8B to Meet China’s EV Mandates

German maker playing catch up with other companies.

by on Nov.16, 2017

VW plans to have two dozen fully electric vehicles, like this I.D. Crozz concept, in production.

To satisfy tough demands of China’s political leaders, Volkswagen AG has announced plans to spend $11.8 billion by 2025 to develop and build all-electric and plug-in hybrid vehicles for Chinese customers.

China is by far Volkswagen’s largest single market and Volkswagen AG and Audi AG, intends to launch 15 of the so-called new energy vehicles models during the next two to three years as it rushes to meet the demands of the Chinese government, which is moving to address the discontent about pollution in China’s cities.

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General Motors, Ford Motor Co. and Daimler AG have all bowed to the pressure from Chinese authorities in one form or another to build more electric vehicles for the Chinese market. In addition, Tesla is negotiating to build a plant in China. 

At the same time China’s indigenous automakers has spawned dozens of new electric carmakers while BYD, which has sometimes been described as China’s answer to Tesla, looks to expand its production while growing outside of China as well.

(VW latest to target the EV heavy truck market. To see more, Click Here.)

The company announced plans to build a new manufacturing facility in Ontario, Canada, to produce battery-electric trucks. No time table has been given for the opening of the plant, but they expect start with 40 employees and grow that number as demand rises.

The 2017 Volkswagen e-Golf is just part of VW's plans to introduce 30 new EVs by 2020.

Meanwhile, Volkswagen has been able to raise capital through their successful operations in China, which have made VW the largest western carmaker operating in the country. But the size of the investment will likely put more strain on the company’s finances, which are taxed by the expensive fallout from the diesel scandal.

VW has never been able to sell the diesel vehicles, once the pride of its fleet, in China.

China’s NEV production and sales quotas, which must be met by 2019, have prompted a flurry of electric car deals and new launches as automakers in China race to ensure they do not fall short. Automakers that do fall short will be required to buy credits.

(Click Here for details about China’s plans to relax rules on foreign EV makers.)

Volkswagen currently has around 10 NEVs already on the market in China, although all are imported models with limited sales volumes, according to a company spokeswoman.

The Volkswagen Group is aiming to sell 400,000 new energy vehicles per year in China by 2020 and 1.5 million per year by 2025. NEVs refer to all-electric battery cars and heavily electrified plug-in hybrids.

The Volkswagen Group is also confident that its group companies and their local China joint venture partners will be able to generate enough NEV sales volume to account for NEV quotas by 2019, VW officials said, adding that there will be no need to buy credits.

“We need high volumes of new energy vehicles … we are working on full speed on that,” the company noted.

Last week, General Motors Co.’s China chief Matt Tsien told reporters GM’s China joint ventures will be able to generate enough NEV sales volume to account for NEV quotas by 2019 and without the need to buy credits.

(VW pushing I.D. Crozz closer to completion. For the story, Click Here.)

Tsien said both GM and its China joint-venture partners “are working to at least meet, if not exceed, those credit mandate requirements.” At the same time, Ford and Daimler recently announced new partnerships in China to help ensure they meet the new mandates.

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