FRANKFURT -- Volkswagen Group is ramping up production of electric vehicles to around 1 million vehicles by the end of 2022, according to plans seen by Reuters, enabling the German company to leapfrog Tesla Inc. and making China the key battleground.
Volkswagen is readying two Chinese factories to build EVs next year. The Chinese plants will have production capacity of 600,000 vehicles, according to Volkswagen's plans, which have not been previously reported -- revealing VW’s ability to industrialize production faster than other pioneers in the EV market.
Tesla is still trying to make more than 500,000 EVs a year by building a new factory in Shanghai, China, while VW can rely on an established workforce in two of its plants in Anting and Foshun to build zero-emissions vehicles.
The scale and speed of VW's electrification push marks a shift in favor of established manufacturers that can use existing factories and profits from trucks, SUVs and crossovers with gasoline engines to scale up faster than startups.
"The truth is barriers to entry in autos remain high," said Max Warburton, an analyst at Bernstein Research. "Making cars is hard. The move to electric vehicles will be expensive, but will probably be led by traditional manufacturers."
VW is leveraging its large infrastructure of suppliers, factories and workers, long a handicap to its profitability, more aggressively than rivals BMW, Renault, General Motors and Tesla, which were all quicker to sell a custom-designed EV.
Rather than adjusting production gradually, and using multi-powertrain platforms, Volkswagen is making a massive bet on a dedicated EV architecture, known as MEB, in the hope of increasing economies of scale sufficiently to push down the price of EVs to around 20,000 euros ($22,262).
The Wolfsburg, Germany, carmaker is retooling eight plants across the globe by 2022 to specialize in manufacturing EVs, and license the electric MEB platform to rivals, senior VW executives told Reuters, putting it on track to become the world's largest maker of zero-emission vehicles.
Tesla has emerged as a serious competitor with a credible vehicle, the Model 3, Volkswagen CEO Herbert Diess told Reuters last week. But startups have a hard time entering mass production without sufficient production facilities, he said.
"The question is, can you expand your production quickly enough? The capital intensity is increasing," Diess said.
To fund its own electrification shift, the German carmaker aims to increase sales of VW SUVs and crossovers, with combustion engines, to 40 percent of overall sales by 2020 from 23 percent in 2018.
The powerstation that supplies energy for VW's flagship e-vehicle factory in Zwickau, Germany, marked by two tall chimneys, was built to power production of the gasoline-powered Volkswagen Golf.
Now Zwickau can piggyback off this infrastructure to ramp up production to 330,000 VW ID electric vehicles by 2021.
Volkswagen Group will increase economies of scale by rolling out electric vehicle platforms to its Audi, Skoda and Seat and Porsche brands.
Volkswagen Group will be in a position to build 22 million electric cars by 2028, of which 11.6 million could come out of Chinese factories, VW said