VW Group boosts battery purchases to $48B, or the same market cap as Tesla

Herbert Diess

New Volkswagen Group CEO Herbert Diess revealed Thursday that the automaker has awarded $48 billion in contracts to battery suppliers. The goal is to reach $50 billion to cover the automaker’s battery needs through to 2025.

The $48 billion figure is roughly equal to the entire market capitalization of Tesla and double what the VW Group had been planning just weeks ago, highlighting just how serious the automaker is about vehicle electrification.

The huge increase is due to a combination of growing demand for electrified cars in China spurred by government mandates and tax incentives as well as a faster than anticipated decline in diesel cars, particularly in Europe.

Diess made the comments during the VW Group’s annual general meeting held in Berlin, where he also revealed that the automaker targets annual sales of 3 million electric vehicles by 2025, reported Thursday. It would mean that one out of every four vehicles sold by the German auto giant would be powered by electricity.

Volkswagen ID electric car concept, 2016 Paris auto show

By as early as 2020, the VW Group’s various brands, which include Audi, Bentley and Porsche, will have at least 25 electric cars and 20 plug-in hybrids on sale. However, this will require huge capacities for battery production which isn’t quite there yet. Diess on Thursday reiterated the need for firms to join forces on battery production.

The Volkswagen brand’s first volume electric car, a production version of the ID hatchback concept, will arrive in 2020. Audi will launch its e-tron SUV later this year and Porsche will launch the production version of its Mission E sedan concept next year.

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The announcement of the major battery deal was announced just day after Tesla reported its first quarter earnings. The automaker reported record negative cash flow of 784.6 million on revenue of $3.41 billion in the quarter, the third consecutive quarter of losses exceeding $600 million. In comparison, the VW Group in the same period recorded positive cash flow of $6 billion on revenue of $69 billion.

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