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VW shows confidence in electric future with higher margin target | Business Section

WOLFSBURG, Germany (Reuters) — Volkswagen raised its long-term profitability target on Tuesday, a sign of the German automaker’s growing confidence in managing the shift to electric and self-driving vehicles.

Outlining its strategy through to 2030, Europe’s biggest automaker also said it expected half of its global vehicle sales to be battery-powered by that date – joining rivals in setting ambitious targets to emerge from the era of combustion engines.

The goals precede a sweeping package of climate policies the European Union plans to announce on Wednesday, possibly including a de facto ban on gasoline-powered vehicles from 2035.

At Volkswagen, which aims to overtake Tesla as the world’s largest maker of electric vehicles or electric vehicles by 2025, battery electric vehicles accounted for just 3% of global sales last year.

“We have set ourselves the strategic goal of becoming the global market leader for electric vehicles – and we are on the right track. Now we are setting parameters,” said managing director Herbert Diess, whose contract was extended last year. last week until 2025.

After announcing stunning first-half results, Volkswagen said it expects the strong performance of its existing business to help fund 150 billion euros ($178 billion) in investment by 2025. in areas such as batteries and software.

He added the synergies between technologies and brands, which range from budget seats and Skodas to high-end Audis and Porsches, also gave him the confidence to increase his 2025 operational return on sales target to 8. -9% vs. 7-8%.

Scale and strength

“We view the combination of scale and financial strength as unmatched,” said Marc Decker, Head of Fund Management at Merck Finck. “In this context, it is only a matter of time before the Wolfsburg-based company becomes the global market leader in electric mobility.”

Volkswagen has drawn up plans to build six major battery factories in Europe by 2030, choosing China’s Gotion High-Tech as a partner for its planned Salzgitter factory in Germany and considering Spain as the location for another factory.

The plans mark the latest step for the world’s second-largest automaker after Toyota to reinvent itself following a 2015 scandal over rigged emissions tests for diesel engines that have so far cost it more than £32 billion. euros.

Heralded via trailers and executive tweets last week, the strategic day tried to recreate the success of Volkswagen’s Power Day in March, which boosted its shares and briefly made it the most valuable company. from Germany.

Although still up 42% year-to-date, stocks have fallen 14% from their March highs, reflecting the challenge of convincing investors that big profits from gasoline-powered cars combustion can be replaced by those of electric vehicles.

Automakers have set a series of goals for an electric future. Last week, Stellantis said it aims for more than 70% of sales in Europe and more than 40% in the United States to be low-emission vehicles by 2030. This includes hybrid vehicles, as well as fully electric battery cars.

Volkswagen said last month it would stop selling gas guzzlers in Europe by 2035 and later in China and the United States as part of its shift to electric vehicles.