Volkswagen faces careful ‘balancing act’ to reach its electric future

Volkswagen’s top finance executive has underlined how important it is for the automaker to carefully transition to electric vehicles while not hurting its ability to make money.

In an interview with CNBC’s Carolin Roth on Wednesday, Chief Financial Officer Frank Witter was asked how the firm would offset the negative impact that its shift to electrification might have on its targets for profit margins.

“We gave guidance for 2020 and 2025, it is a balancing act with more electric vehicles coming to market and the different level of profitability,” he told CNBC.

“We have efficiency programs for all brands and everybody is committed to deliver on it, but what’s key is that the product is appealing.”

The German carmaker is planning to launch “almost 70 new electric models” by the year 2028. In March, it said it would spend over 30 billion euros ($33.46 billion) on the electrification of its vehicle portfolio by 2023. But in May, Witter said that electric vehicles would “put substantial pressure on the overall group margin,” according to Reuters.

In his interview with CNBC this week, Witter also acknowledged that electric vehicles were “not for everybody in the first instance.”

“We also offer hybrids for those who don’t want to go the whole nine yards on electrification, but (the) product will make a difference and we feel very strongly about those products we are bringing to market,” he added.

Witter’s comments come as Volkswagen gets ready to start series production of the ID.3, an all-electric vehicle, at its Zwickau plant next week.

That facility is currently undergoing a conversion from being a 100% internal combustion engine factory to one that produces only electric vehicles. According to Volkswagen, from 2021 Zwickau will have the capacity to produce 330,000 all-electric vehicles annually.

Volkswagen is one of many major automobile firms making plays in the electric vehicle sector.

The Hyundai Motor Group recently said it would launch 23 battery electric vehicles over the next few years, while Volvo Cars wants 50% of the cars it sells to be fully electric by 2025.

On the topic of infrastructure for electric vehicles, Witter admitted that things were “not yet perfect,” going on to add that both government and industry were “all committed to improve the situation.” He went on to state that “charging infrastructure will improve over time, there is no doubt.”

On Wednesday, Volkswagen said that sales revenue between January and September hit 186.6 billion euros, a 6.9% increase year-on-year.

It added that vehicle markets in “many regions of the world” were expected to “contract faster than previously anticipated.” Deliveries to customers for 2019 are now expected to “be on a level” with 2018, despite previous expectations for a moderate increase.

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