Germany’s VW to focus on electric vehicles, aims to return to profitable growth

LONDON (ICIS)–Volkswagen (VW) has signed a “pact for the future” which it hopes will return the company to profitability, with one of the key components being a focus on the development and production of electric vehicles (EVs), the German car manufacturer said on Friday.

Volkswagen’s announcement comes just over a month after Bundesrat, the German federal council, passed a resolution calling for an EU-wide ban on combustion-engine cars by 2030.

VW will develop a pilot plant for battery cells and cell modules, while current plants will begin production and development of electric vehicles.

“To bring Volkswagen to the forefront of the industry in the future-oriented areas of e-mobility and digitilisation, the company will be making a massive investment in new technologies”, the company said.

“The plants at Wolfsburg and Swickau are to assume responsibility for the production of electric vehicles based on the Modular Electric Drive Kit.

“Future-oriented work is to be divided between the main German components plants. Brunswick will continue to produce the battery system for the Modular Transverse Toolkit and will also be developing and producing the battery system for the Modular Electric Drive Kit (MEB).

“Kassel is to develop the MEB drive system and to be responsible for the assembly of the entire system in addition to electric transmission production.

“Salzgitter will produce and supply MEB drive system components. In addition, the plant will be building a pilot facility for battery cells and cell modules.”

Chairman of the VW brand board of management, Herbert Diess, said: “With the pact for the future, Volkswagen will be taking a major step forwards. The pact represents a fundamental transformation of the value stream, the development of new competences and strategic investment.

“We will be strengthening the company’s economic viability and competitiveness and will be safeguarding the future of our plants. The socially compatible loss of jobs will be offset by the creation of jobs in other units.”

VW said its strategy would have a positive impact on annual earnings of €3.7bn from 2020. The company’s shift in focus will create 9,000 jobs in “future-oriented” areas of the business in Germany, while there would be a loss of 23,000 jobs in conventional areas but without compulsory redundancies. 

“We will be transforming the entire brand and making it fit for the fundamental transformation of our industry. At Volkswagen, we are taking our future into our hands,” added Diess.

While a restructuring of this magnitude will have an impact on the petroleum industry, the impact on the petrochemicals industry resulting from the increased focus on EVs is far more prevalent.

Currently, the greatest barrier to a widespread introduction of EVs is the issue of battery life, which has led to manufacturers finding alternative methods of saving battery levels.

The most obvious solution is to make EVs more lightweight by using alternative materials such as plastics and, more recently, carbon fibre, which has a 30% weight-saving compared to aluminium.

Additional reporting by Mark Victory

The automotive industry is a major global consumer of petrochemicals which contributes more than a third of the raw material costs of an average vehicle. ICIS tracks the movement of petrochemical raw material costs in auto production both globally and regionally with the weighted ICIS Basket of Automotive Petrochemicals (IBAP).

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