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Volkswagen Spends $7.1 Billion to Challenge Tesla, Ford, and GM

The automaker looks to kick gasoline cars to the curb as it competes with Tesla and Ford.
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Volkswagen  (VWAGY) - Get Free Report is revving up its plans to compete with Tesla  (TSLA) - Get Free Report , GM  (GM) - Get Free Report and Ford  (F) - Get Free Report in the electric vehicle space.

The German automaker said it is putting down $7.1 billion in North America over the next five years to push its electrical and digital makeover as Volkswagen aims to drive 55% of U.S. sales to be fully-electric by 2030. 

'This Profound Commitment'

Last week, Volkswagen said several of its battery-electric models have already sold out for 2022 and Arno Antlitz, Volkswagen Group's chief financial officer noted that "our battery electric vehicle margins are much stronger already today than we thought three or four years ago."

Scott Keogh, president and CEO, Volkswagen Group of America, said the company will be leaving the internal combustion engine in the dust with an eye on phasing out sale of gasoline-powered vehicles by the beginning of the next decade.

"This profound commitment to our localized capabilities will transform Volkswagen into one of the leading EV brands known for its commitment to innovation, quality, and the communities we call home," Keogh said in a statement.

In place of the old gas guzzler, Volkswagen will advance its electric line-up, including the American-assembled ID.4 in 2022, the ID. Buzz electric microbus in 2024, which the company unveiled in Paris, and new electric SUVs in 2026.

6. 2017 Volkswagen Beetle convertible

Volkswagen's North American Portfolio

Volkswagen plans to introduce more than 25 new battery-electric vehicles to American consumers through 2030.

The company said more than 90% of its North American vehicle portfolio is assembled in North America, including the Atlas and Atlas Cross Sport SUVs in Chattanooga, TN, as well as Tiguan, Taos and Jetta in Puebla, Mexico.

Volkswagen's battery engineering lab will start operations in May. The facility, bolstered by a $22 million investment, will enable Volkswagen to test and validate batteries for all its electric models in the American marketplace.

Volkswagen also wants to localize all major design and engineering responsibilities for the “vehicle hat” (body and interior) of products destined for the domestic markets by 2030.

Keogh said the company is also ramping up its software and digital products, with plans of bringing over-the-air updates and new software features, such as plug and charge, for the ID.4 this year. 

Volkswagen is also working with CARIAD SE, a software company within the Volkswagen Group, to support the formation of its North American subsidiary this year, with software units in Seattle, WA, and California’s Bay Area.

Ford and Tesla Investing Too

Earlier this month, Volkswagen said it would spend $2.2 billion to build a new manufacturing facility for its Trinity electric vehicle near its main plant in Wolfsburg.

At roughly the same time, Tesla launched a recruitment campaign for its Gigafactory in Berlin, about 140 miles down the road from the Wolfsburg site.

And then there's Ford, which recently announced a reorganization that separates it internal-combustion-engine operations from those of electric-vehicle development.

Ford developing electric versions of its legendary models and also electric versions of its bestsellers.

Over on the other side of the world, Volkswagen China Group said it will form joint ventures with Huayou Cobalt and Tsingshan Group to secure nickel and cobalt supplies for electric vehicles in China.

The company said it is looking "to achieve significant cost advantages, secure the raw material supply and achieve a transparent and sustainable supply chain."

Nickel prices had been surging recently, but prices tumbled 15% Monday.