VW aims to overtake Tesla with huge electric push

VW is one a number of major automakers set to challenge Tesla in the coming years. Photo / Getty Images

Volkswagen plans to halve the cost of power systems for electric cars over the next decade in a massive investment push that could knock Tesla off its perch.

The German giant will build six factories capable of producing 240 gigawatt hours of batteries a year in Europe over the next decade.

This is enough to provide batteries for 4m cars, equivalent to just over 40pc of Volkswagen Group's annual vehicle production.

Herbert Diess, the VW chief executive, said: "E-mobility has won the race. Our goal is to secure a pole position in the global scaling of batteries."

The plans - estimated to cost about £20bn - means VW will abandon its reliance on external battery suppliers.

It is also a definitive statement from the one of the world's largest automotive companies that electric is the future for transportation.

David Bailey, a car industry expert at Birmingham University, said: "VW is ending the uncertainty about whether the future is electric, hybrid, or even hydrogen. This is an industry giant saying electric is the future with massive investment."

According to analysis by Bloomberg NEF, the expansion puts VW on course to become one of the world's largest producer of battery cells, second only to China's Contemporary Amperex Technology.

The German manufacturer already has agreements with partners for two battery plants and wants to set up a further four, securing supply of the power systems.

It also plans to operate a "unified cell" strategy which will reduce costs and complexity through new production methods and greater recycling, while at the same time improving performance of batteries, which currently account for about 40pc of the cost of an electric vehicle.

Thomas Schmall, VW board member for technology, said: "This will finally make e-mobility affordable and the dominant drive technology.

"We will use our economies of scale to the benefit of our customers when it comes to the battery. On average, we will drive down the cost of battery systems to significantly below €100 per kilowatt hour. This will finally make e-mobility affordable."

Part of the strategy includes expansion of a fast charging network for electric vehicles that VW is working on with energy company partners BP, Iberdrola and Enel, adding 18,000 of high-speed charging points in Europe by 2025.

VW has previously announced plans for more than €30bn of investment in electric vehicles, along with new technology and platforms for them, and it is unclear if this is included in the latest announcement.

However, it sets up VW to take the lead in electric vehicles from Tesla, with the German company planning to add 50 battery vehicles to its line-up by 2030. Tesla currently has just four cars in its stable.

Mr Bailey added: "Tesla has dominated electric cars but now the giants of the automotive industry are arriving, and they know exactly how to build cars.

"Tesla may have advantages with its software, but its build quality is not great and one of the previous attractions of Tesla, the supercharging network, could be eroded by VW expanding its fast-charging system."

VW said it plans to build 26m all-electric cars by 2030, up from the 230,000 it sold in 2020.

By comparison, Telsa sold about 500,000 cars last year.

The developments came as VW said it is pushing thousands of older staff to retire early in a bid to cut costs.

VW will now offer partial retirement to workers born between 1961 and 1964 and early retirement for those born between 1956 and 1960, affecting about 11,500 staff. It expects up to 900 people to take up the offer.

The company aims to freeze the size of its workforce by cutting some roles while hiring in "forward-looking" areas such as battery cell development.

However, its push to axe older workers could attract criticism after UK charities argued that so-called "silver quotas" are needed to avoid an older workers job gap.

A number of large businesses including Co-op, Boots and Barclays have already vowed to increase the number of older workers they employ by 12pc by next year.

Insurer Aviva has also focused its recruitment efforts in recent years on "baby boomers" – those born during the post-Second World War baby boom – as a rising number of adults hope to keep working well into their golden years.

Andy Briggs, the insurer's former UK boss, said in 2017 that there were misconceptions among employers about older people. He said it was younger people who liked to go out and get "absolutely hammered" while also being more likely to jump between jobs.

Bernd Osterloh, chairman of the General Works Council, said Volkswagen is "sticking to its tried-and-tested approach" with partial retirement offering a good opportunity for its older workers.

- Telegraph Media Group