FRANKFURT -- Volkswagen Group lowered some forecasts for next year to reflect weakening demand in big car markets such China as a decade of nearly uninterrupted industry growth grinds to a halt.
VW cut its outlook for revenue and operating profit growth over four years to 2020. It kept its profit margin targets.
"We are facing a declining market environment," CEO Herbert Diess said during a telephone conference with analysts and investors on Monday
Diess said some regions are poised to deteriorate further next year. "We are well prepared," he said.
VW last month trimmed its forecast for worldwide deliveries amid cooling economic growth in some markets, trade tensions and Brexit. Then last week it lifted planned spending to record levels on new technology including electric cars and software operations.
Diess said on Monday spending on software and digital operations would be doubled to 14.4 billion euros as part of an allocated 60 billion euros ($66 billion) in investment for future technology over the next five years.
To counter the cost of rolling out electric cars, the company will increase sales of higher-margin SUVs and work on lowering the cost of producing electric vehicles, Diess said.
Volkswagen's new ID3 full-electric compact hatchback, for example, will be 40 percent cheaper to build than the electric version of its Golf model, he told investors.
As the battery pack in the new ID3 can be used to add structural rigidity, some savings can be made to the vehicle body. Furthermore, the modular layout of the battery aids efficient packaging and economies of scale, Diess said.
VW said it would start producing the ID3 in Dresden as well as in Zwickau, eastern Germany.
Electric cars will reach cost parity with gasoline and diesel variants from about 2025 onwards, the company said, helping to deliver profit margin targets.
VW said it expects at least 20 percent sales growth between 2016 and 2020. The previous forecast was for an increase exceeding 25 percent.
Operating profit excluding special items is forecast to advance at least 25 percent during the period, less than a previous estimate of more than 30 percent.
VW is keeping its operating profit margin targets excluding special items for this year and next, CFO Frank Witter said.
The company's goal for return on sales for 2021 should be similar to 2020, Witter said, while acknowledging that reaching the Audi brand’s targeted return to a margin corridor between 9 percent and 11 percent "is a stretch."