Why Is VW Group Spending USD65 Billion On Petrol Engine Technology
In April 2023, Volkswagen made a strong statement that it will end petrol engine development (ICE) and the current best selling VW Golf GTi Mk8 will be the last full ICE powered VW.
Then in 2024, this year, Volkswagen made a surprising statement that it will prolong the development and sales of petrol engine cars and potentially add new petrol powered models but without increasing total investment (CEO said in August this year) with planned expenditure from 2025 to 2029 to fall to around 165 billion euros.
“Overall we will decrease investment. When we talk about adding combustion engines, it has to be compensated,” Oliver Blume said following earnings results. “I’m talking about all our brands.”
So, why is one of the worlds largest automotive group making a sharp ‘U’ turn in its product direction?
Well, the VW Group shared in its latest financial update on 10 April that sales of all-electric vehicles declined by 24 percent in Europe, while sales grew by 91 percent in China, year-over-year.
However, overall, the company said it increased its vehicle deliveries by 3 percent to 2.10 million vehicles with the main drivers being China, South America and North America.
“Vehicles with combustion engines (ICE and PHEV) increased by just 4 percent to 1.97 million units, overcompensating the slight decline of 3 percent to 136,400 all-electric vehicles (BEV). In this segment, strong growth in China (+91 percent) did not fully offset the decline in Europe (-24 percent).
“However, incoming orders for BEVs in Western Europe developed positively from January to March. More than twice as many all-electric models were ordered as in the same period last year (+154 percent), so that the BEV order bank currently stands at around 160,000 vehicles,” a company statement said.
Meanwhile, even Volvo Cars who just a year ago was adamant on a full electric vehicle lineup, has made a full ‘U’ turn and just launched a NEW ‘plug-in hybrid XC90 SUV.
Jim Rowan, Volvo’s CEO, has reiterated his belief in the superiority of electric propulsion over internal combustion engines, he acknowledges that achieving full electrification across diverse global markets will take time. This nuanced perspective highlights Volvo’s strategic use of hybrid vehicles as a practical and effective bridge during this transitional phase.
Moreover, Rowan emphasized that hybrids, specifically plug-in hybrids and mild hybrids, continue to play a crucial role in Volvo’s lineup (he wasn’t singing the same tune a year or so ago when we interviewed him in Sweden and mentioned how ‘not everyone’ wants an electric car but many ‘want a Volvo’. He flatly disagreed with us and said that ‘everyone’ will want and buy a Volvo EV …… even in Malaysia).
These vehicles not only cater to varying market adoption rates for EVs but also remain highly popular among Volvo’s customers. By continuing to invest in hybrid technology, Volvo is ensuring that it meets current consumer demands while gradually steering towards a future dominated by electric mobility.
So, it looks like the petrol powered vehicle is here to stay and lets see what the European Union will do in the coming years.
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