Volkswagen Plans to Invest Billions in Gasoline Engine Development

Volkswagen (VW) Group, a leading automotive giant, has announced plans to invest billions in the development of gasoline engines, signaling a shift in its strategy amidst the push towards electric vehicles (EVs). This move comes as several automakers reassess their ambitious electrification goals due to various market and technological challenges.

Significant Investment in Combustion Engines

Volkswagen is set to allocate a substantial portion of its research and development budget to internal combustion engines (ICE). Out of the €180 billion ($196 billion) earmarked for R&D in 2023, over €60 billion ($65 billion) will be invested in enhancing the competitiveness of their combustion engine vehicles.¹

Arno Antlitz, the Chief Financial Officer and Chief Operating Officer of Volkswagen Group, emphasized the ongoing relevance of ICE. “The future is electric, but the past is not over. It is a third, and it will stay a third,” he said at a Reuters event in Munich.

Balancing Electric and Combustion Technologies

Despite VW’s commitment to electrification, with plans to go fully electric in Europe by 2033, the company acknowledges the need to maintain a balance. Last year, VW brand boss Thomas Schäfer referred to ICE as “old technology” but recognized the continued demand for combustion engines.

Other brands within the VW Group are also exploring sustainable fuels. Porsche is actively producing synthetic fuel, while Bugatti and Lamborghini are considering alternative fuels to preserve combustion engines.

Industry-Wide Reassessment

Volkswagen’s decision mirrors a broader industry trend where automakers like Ford, General Motors, and Mercedes-Benz are pausing or clarifying their electrification strategies. These companies recognize the slower-than-expected consumer adoption of EVs and the necessity of ICE in the short term.²

Ford, for example, has asked dealers to hold off on EV-centric investments as it reevaluates its retail strategy. General Motors has extended its all-electric lineup timeline to “over decades” rather than by 2035, and Mercedes-Benz continues to balance ICE, EV, and PHEV offerings.

Consumer Reluctance and Regulatory Pressures

One of the primary reasons for this shift is Volkswagen’s consumer reluctance to fully embrace EVs. Despite growing market share, the adoption rate remains slower than anticipated, prompting automakers to continue investing in making gasoline engines cleaner and more efficient.

Additionally, stringent emissions regulations require car companies to innovate and improve the environmental impact of their ICE vehicles, adding another layer of complexity to the transition.

Global Challenges and Competition

The aggressive push for electric vehicles from countries like China presents a significant challenge for global manufacturers. VW and other automakers must navigate this competitive landscape while balancing investments in both ICE and EV technologies.

Conclusion

Volkswagen’s strategic investment in gasoline engine development highlights the complexities and challenges of the automotive industry’s transition to electric vehicles. By allocating significant resources to both ICE and EV technologies, VW aims to stay competitive and responsive to market demands and regulatory requirements.

As Antlitz aptly put it, “The future is electric, but the past is not over.” This sentiment underscores the evolving landscape of the automotive industry and the need for a balanced approach in the journey toward sustainable transportation.

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