VW Teams With Chinese Partners for $18 Billion Technology Push

(Bloomberg) -- Volkswagen AG's world-leading development budget is shifting into overdrive, bolstered by spending at its Chinese joint ventures as the German carmaker seeks an edge in producing electric, self-driving autos.

The partnerships' technology investments in the next five years will total 15 billion euros ($18 billion), Jochem Heizmann, head of Volkswagen's business in China, said Tuesday at a new-model presentation in Beijing. That amounts to an extra 44 percent on top of the German manufacturer's own spending to create battery-powered, autonomous systems and related wireless services. The group is hiking its Chinese investments as the market continues to surprise to the upside, Heizmann said.

“We need to speed up,” Chief Executive Officer Herbert Diess said at the event. “Change is getting faster, more dynamic and more ambitious, especially here in China.”

Diess replaced Matthias Mueller as CEO two weeks ago to accelerate Volkswagen's revamp for the electric-auto era. The world's biggest automaker outlined a 34 billion-euro investment plan in November to develop new technology by 2022. Projects include coming out with electric versions of all 300 cars, trucks and buses in its line-up plus adding an all-new set of battery-powered vehicles.

Skills Needed

The challenges include developing models that attract buyers, as well as dealing with consumers' changing attitudes toward owning cars. Diess said in a Bloomberg Television interview with Tom Mackenzie that the industry needs to come up with new skills in areas such as software.

China's government signaled last week that it'll eventually allow foreign automakers to take full ownership of their local ventures, marking the end of a decades-long setup. Eliminating the current 50 percent stake cap will benefit electric-vehicle producers like Tesla Inc. first, with the restriction on such businesses lifting as soon as this year. The limit generally for passenger-car producers will end in 2022.

Volkswagen is “well set up” with its Chinese partnerships and doesn't plan any change in the ventures' ownership, Diess said.

--With assistance from Tom Mackenzie

To contact the reporters on this story: Elisabeth Behrmann in Beijing at ebehrmann1@bloomberg.net, Christoph Rauwald in Frankfurt at crauwald@bloomberg.net.

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net.