Volkswagen Unveils $7.1B Plan To Boost EV Presence In North America And Take On Tesla

Volkswagen Group VWAGY has said it would spend $7.1 billion over the next five years on electric vehicle projects in North America, as the German automaker tries catching up with industry leader Tesla Inc TSLA on its home turf.

What Happened: Volkswagen aims to launch 25 new EV models in North America through 2030, with a target of 55% of U.S. vehicle sales to be fully electric by the end of the decade.

That plan includes preparing its Chattanooga, Tennessee facilities for local EV production, including the assembly of the ID.4 SUV, starting this year. Parts for the key launch would be sourced mostly from regional suppliers. 

The ID.4 is crucial for Volkswagen's success as it is expected to compete with Tesla’s Model Y in the high-volume compact crossover segment.

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The automaker will also upgrade its factories in Puebla and Silao, Mexico by 2025 to assemble EVs and components such as e-motors.

Volkswagen aims to eventually phase out gas-powered vehicles from its American lineup at the beginning of the next decade. 

Nearly 90% of Volkswagen’s vehicle portfolio for North America is currently assembled at sites in Tennessee and Mexico.

The automaker said it has spent more than $2.7 billion in supplier partnerships in North America, including a battery coalition with South Korea’s SK Innovation to launch the ID.4 SUV. 

Volkswagen said it is currently assessing governance and finance models for its battery cell production plans in the United States and aims to finalize decisions this year.

Why It Matters: Legacy automakers such as General Motors Co GM, Ford Motor Co F and Volkswagen are placing tighter deadlines to switch to EVs and setting aside billions of dollars to meet those ambitious targets as they look to play catch up with Tesla.

Elon Musk-led Tesla delivered nearly a million electric cars in 2021 and is expected to sell even more this year as it brings two major sites online — Giga Berlin and Giga Texas.

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The Berlin plant begins first customer deliveries on Tuesday and could eventually clock a 500,000 annual EV capacity.

Price Action: VWAGY stock closed 0.6% lower at $24.5 a share on Monday.

Photo courtesy: Volkswagen