VW is increasing investments in the switch to electric cars with a cash injection of 180 billion euros

Volkswagen is increasing its investments in electric vehicles, committing €180 billion over the next five years to manufacture its own batteries and expand in the world’s largest markets in the US and China.

This is a 13 percent increase from last year’s pledge of $159 billion for the vehicle.

Chief Executive Officer Oliver Blume said the world’s second largest carmaker by volume will use the investment to target growth in “key markets”, adding that 2023 will be a “crucial year” for the group.

Despite pressure to diversify both supply chains and distribution away from China following rising geopolitical tensions, VW plans to invest to strengthen its position in the country, where half of its profits are generated.

According to one person who took part in internal discussions, they believe China will not invade Taiwan in the short term because of the shock it would inflict on its own economy.

Blume said VW needs to “listen more to Chinese customers,” adding that in-car karaoke machines and the ability to make avatars are among the trends China-based software division Cariad is developing.

An in-car avatar would be like a passenger that could be used to provide the driver with visual guidance and assistance with directions and hazards.

The German automaker’s announcement comes as the industry pushes ahead with the switch from internal combustion engines to battery-powered vehicles.

VW has gone further than its competitors with plans to not only assemble batteries but also manufacture cells.

The company recently announced plans to build an electric vehicle plant in the US and a supporting battery plant in Canada, lured by US President Joe Biden’s $369 billion package of green energy subsidies and tax incentives in the Inflation Reduction Act.

Blume said on Tuesday that he had drawn up plans with Canada’s Prime Minister Justin Trudeau, and hailed the country’s “risk-sharing” approach to investing as it agreed to offer VW tax incentives based on sales.

The owner of brands including Porsche, Škoda and Audi also announced that he had suffered a €2 billion loss in connection with the sale of his business in Russia.