Volkswagen to Build $2.2 Billion New EV Plant to Keep Up With Tesla

(Bloomberg) -- Volkswagen AG is moving ahead with a plan to add an electric-car factory in Germany to keep pace with Tesla Inc., whose plant near Berlin is set to ramp up in the coming weeks.

VW's new plant, set to cost around 2 billion euros ($2.2 billion), will be built close to it's sprawling facility in Wolfsburg, the company said Friday, on the heels of Tesla receiving final approvals. The site, which will make a new model named code-named Trinity, will start construction in 2023 with cars rolling off the production line from 2026.

VW is “strengthening and sustaining the competitiveness of the main plant and giving the workforce a robust long-term perspective,” VW brand chief Ralf Brandstaetter said in a statement following a supervisory board meeting.

The decision to add a brand-new facility is part of Chief Executive Officer Herbert Diess's push to pick up the pace in the EV shift and become more efficient. Building the factory close to Wolfsburg is also a nod to VW's powerful unions, who have frequently clashed with Diess. Tensions came to a head late last year after the CEO floated plans to cut jobs, which led to a compromise to add the plant as well a pledge to spend 800 million euros on a tech campus.

The new factory is targeting a production time of 10 hours per vehicle, vastly shorter than it currently takes to piece together a vehicle at other sites.

To gain momentum and fund the transition to battery-powered and self-driving models, VW last month made its boldest strategic move yet when it outlined a listing of Porsche, its most profitable asset. The potential initial public offering could value the iconic sports car brand at as much as 85 billion euros, according to Bloomberg Intelligence.

The separation requires a complex framework that navigates VW's convoluted structure. The IPO, which could happen as early as during fourth quarter, targets the sale of 25% of non-voting shares in Porsche while at the same time handing VW's controlling billionaire Porsche and Piech family shareholder a blocking minority stake.