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Volkswagen revs up its electric shift

To spend billions on transformation

Matthias Mueller, CEO of Volkswagen AG, sits in the group's fully autonomous concept called Sedric during a preview evening for the media on the eve of the Frankfurt International Motor Show on Monday. (AP photo)

Frankfurt: Volkswagen AG is putting its full force behind a shift into electric cars as the world's largest automaker accelerates away from combustion engines and tries to draw a line under the emissions-cheating scandal that's weighed on the company for two years.

Speaking on the eve of the Frankfurt International Motor Show, chief executive officer Matthias Mueller announced sweeping plans to build electric versions of all 300 models in the 12-brand group's line-up.

The German auto giant laid out the enormity of the task ahead, vowing to spend €20 billion ($24 billion) by 2030 to roll out the cars and earmarked another €50 billion to buy the batteries needed to power the vehicles.

Volkswagen's plans are the most ambitious in the auto industry and reflect the company's efforts to recover from admitting that it rigged 11 million diesel vehicles to cheat on emissions tests.

The scandal set off a backlash that has led consumers to turn away from the technology amid concerns about pollution and driving bans. That creates problems for Volkswagen as it relies on diesel cars to boost profit and lower carbon-dioxide emissions to reach tightening European environmental targets.

"We have got the message and we will deliver," Mueller said in his speech to hundreds of guests at the carmaker's event in the German financial capital. "The transformation in our industry is unstoppable. And we will lead that transformation."

Prior to the scandal, German automakers were hesitant about electric cars because of the high costs and limited range. Diesel, meanwhile, was a convenient choice because it generated peppy acceleration while emitting about a fifth less CO2 than comparable gasoline engines.

Mueller said on Monday that diesel remained a key part of the company's strategy. Dieter Zetsche, his counterpart at Daimler AG, said he regretted that consumers have lost trust in diesel.

Volkswagen is throwing the fire power of brands such as Audi, Porsche and Skoda behind the push, aiming to overwhelm the likes of Tesla Inc with its size and market power and transform from a battery-vehicle laggard into a leader.

Tesla has started to roll out the $35,000 Model 3 to broaden its appeal and stem billions of dollars in losses. Leaving its upmarket niche is putting the Californian startup on direct collision course with traditional automakers like VW, Toyota Motor Corp and Nissan Motor Co as falling battery costs are forecast to make electric cars more affordable in coming years.

VW, Daimler and BMW AG are accelerating electric-vehicle plans to react to slumping sales of diesel models amid the fallout from VW's cheating scandal.

With their big cars, German automakers are particularly reliant on diesel in their home market of Europe and had been banking on the fuel-efficient engines to help meet ever tougher emissions rules that will tighten further early next decade.

Underscoring the enormity of the shift taking place in the industry, Mueller said VW would need the equivalent of at least four gigafactories for battery cells by 2025 just to meet its own vehicle production.

At €50 billion, the CEO announced one of the largest tenders in the industry's history for the procurement of batteries.

"Financially we're very robust," Mueller said in a Bloomberg TV interview. "We'll generate the money we need to make these investments."

By 2025, VW aims to have 50 purely battery-powered vehicles and 30 hybrid models in its line-up, with a goal of selling as many as three million all-electric cars by then.

The transformation will pick up speed after that to reach the 2030 goal as economies of scale and better infrastructure help bring down prices and accelerate sales.

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