Volkswagen aims for 'margin parity' on some EVs by 2025

By Victoria Waldersee and Joseph White

MUNICH (Reuters) -Volkswagen Chief Financial Officer Arno Antlitz said on Wednesday rising battery material costs mean it will be 2025 before the automaker can build some electric vehicles at the same profit margins as combustion models.

"A lot of the margin parity depends on raw materials," Antlitz told the Reuters Automotive Europe conference.

When Volkswagen launched its new electrification strategy in July 2021, it said it expected to reach margin parity between combustion engine and electric vehicles "within the next two to three years".

Now, Antlitz said, rising materials costs mean the profitability goal depends on VW making its own batteries.

"We haven't given up the topic of margin parity," Antlitz said. In "2025 and beyond we plan for margin parity", particularly with models that use Volkswagen's own batteries.

Volkswagen is "planning for significant positive margin" on a new EV model, the ID.2, that will go into production in Spain in 2025 and be priced from 25,000 euros, Antlitz said.

The CFO also said Eastern Europe was still likely to be the location of its next battery plant, and that it was in talks with specific locations.

The carmaker had been expected to make a decision on a site for an Eastern European plant last December, but its technology officer said in March it was waiting to hear more from the European Union about what incentives would be available in the region before making a final decision.

Volkswagen is still weighing options for converting its Wolfsburg factory in Germany to build a new generation of electric vehicles called Trinity, or building a new factory for the models.

Antlitz said the delay in the launch of the Trinity vehicles gives Volkswagen the opportunity to retrofit the existing Wolfsburg operations, potentially at a lower cost than building a new 2 billion euro factory.

That investment figure is not up to date because of inflation, Antlitz said.

Volkswagen is already planning to build the new generation of the electric ID.3 in Wolfsburg starting this year, as well as a new fully-electric SUV model on the existing MEB platform.

The proposal to build an all-new factory for the future Trinity line of EVs was made by former Chief Executive Herbert Diess. His successor, Oliver Blume, put that plan under review.

The future of the Wolfsburg complex is of special importance to Volkswagen's unions because it is the headquarters and historic centre of the automaker's operations.

Antlitz said the automaker plans to convert existing operations "plant by plant" to build EVs. "We won't add additional capacity."

Shareholders can expect an update on the carmaker's financial targets and capital allocation plans at its upcoming capital markets day on June 21, the CFO added.

(Reporting by Joe White, Editing by Bernadette Baum, Kirsten Donovan)