Volkswagen Group earmarks $12 billion to develop electric cars in China

Volkswagen FotograFFF / Volkswagen group will invest more than 10 billion euros ($12 billion) with its partners to make and develop a range of new-energy vehicles in China as carmakers step up investments in low-emission models in the world’s biggest auto market.

Volkswagen (VW) will make the investments by 2025 and introduce 40 locally produced vehicles, its China head Jochem Heizmann told reporters in Guangzhou Thursday. The European automaker’s venture with Anhui Jianghuai Automobile Group will start production of electric vehicles in the first half of next year, while sales will start in the second half.

The German manufacturer joins Ford Motor Co. in boosting investments in electric vehicle development in China as the country will require most automakers to obtain a new-energy vehicle score linked to the production of various types of zero and low-emission vehicles. Volkswagen in September announced sweeping plans to build electric versions of all 300 models in the 12-brand group’s lineup, vowing to spend 20 billion euros by 2030 to roll out the cars and earmarked another 50 billion euros to buy the batteries needed to power the vehicles.

In May, VW received a green light from the government to set up a joint venture with the state-owned Chinese automaker to make electric cars. The Wolfsburg, the Germany-based company sold 2.5 million vehicles in China in the first 10 months. VW has previously said it plans to sell 400,000 units of new-energy vehicles a year by 2020 and increase that number to 1.5 million by 2025.

Last week, Ford said it will invest 5 billion yuan ($753 million) with partner Anhui Zotye Automobile Co. to make and sell small electric cars in China.

VW will introduce 15 models based on its MQB platform, which converts internal combustion engine cars into plug-in hybrid or pure electric versions, said Heizmann. The rest of the models will be developed on new platforms, he said.

China’s Policy

In September, China unveiled a comprehensive set of emission rules and delayed a credit-score program tied to the production of electric cars, giving manufacturers more time to prepare for the phasing out of fossil-fuel powered vehicles.

Under the so-called cap-and-trade policy, automakers must obtain a new-energy vehicle score -- which is linked to the production of various types of zero- and low-emission vehicles -- of at least 10 percent starting in 2019, rising to 12 percent in 2020, the Ministry of Industry and Information Technology said on its website.

“The new adjusted quota policy is really the right thing,” Heizmann said.

By delaying the implementation year to 2019 and allowing carmakers to combine credits in 2019 and 2020, it’s no longer a major challenge for VW to fulfill the demand, said Heizmann. It’s a tough target for VW to achieve the average fuel consumption level of the fleet at 5 liters per 100 kilometers (62 miles) by 2020 and the automaker is looking at all technologies to improve fuel consumption efficiency of internal combustion engine vehicles, he said.

Electric cars will outsell fossil-fuel powered vehicles within two decades as battery prices plunge, turning the global auto industry upside down and signaling economic turmoil for oil-exporting countries.

The Bloomberg New Energy Finance forecasts that adoption of emission-free vehicles will happen more quickly than previously estimated because the cost of building cars is falling fast.