Volkswagen plans to open two new factories in North America to spearhead its push into the electric vehicle market, which the German carmaker says has become more appealing since US president Joe Biden unveiled more than $400bn in clean energy incentives.
VW said on Friday that it would open a new assembly plant in Columbia, South Carolina, to produce electric models for its revived Scout brand. It is also searching for a site for a new battery factory in North America.
North America offered “huge potential” for the company, VW’s finance chief Arno Antlitz said on Friday. “We are strong in Europe and China and want to keep that strength . . . but it is really important to increase that third pillar in the US.”
The company’s $2bn investment in the South Carolina plant will create about 4,000 jobs in the area.
VW is following the lead of other international carmakers, including Hyundai, Honda and Toyota, that have agreed deals to produce electric vehicles or batteries in the region since the subsidies were introduced as part of the US Inflation Reduction Act.
To qualify fully for the subsidies, the law requires electric vehicles to be substantially made in the US and exclude materials from certain countries, including China.
“We would have done that anyway,” said Antlitz, referring to its plans for the factories, as “the whole market in the US is transforming to electric, and we have the technology and the will to transform ourselves”.
But the incentives in the new legislation present “the possibility to enlarge our global footprint even faster in the US”, he added. The company expects to build new Scout models from 2026.
VW believes that the shift to electric vehicles gives it a window to break into a market in which it has historically struggled. The company is now the fourth-largest seller of electric vehicles in the US.
Separately on Friday, VW said it expected global sales to climb steeply this year, as the supply chain shortages that have hampered carmakers for two years begin to ease.
It forecast that sales would rise from 8.3mn last year to 9.5mn this year, and that revenues would climb by up to 15 per cent, sending shares in the company up 7 per cent.
“We expect the supply chain bottlenecks to gradually ease in the current year, allowing us to service the high order backlog,” said Antlitz. This is likely to lead to more competition and price cuts, as carmakers face falling demand and higher production.
“The competition will increase, and in order to prepare for that we have to maintain pricing discipline,” he added. The company “cannot rule out the possibility of a slowdown in the economy and weakening in demand, and are preparing for this accordingly”, he said.
Daniel Roeska, analyst at Bernstein, said he was “wary of Volkswagen’s volume-led strategy into an economically more challenging year” given that the company often missed its delivery targets.
“While order books in Europe remain robust, the US and China will also have to deliver for Volkswagen to meet its 2023 targets,” he added.