VW hopes to turn a profit in South America with €1bn investment

German automaker Volkswagen has revealed its plans to invest €1 billion over the next five years into new schemes in South America, hoping to turn a profit in the region for the first time since 2013.

Despite the ongoing problems associated with the semiconductor shortage and the coronavirus pandemic, the company has earmarked the potential for sustained profit in the region, particularly the digitalisation and decarbonisation of local auto markets.

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Part of its plans includes research and development initiatives into the manufacture of new biofuels to go alongside what it describes as its "global electrification offensive" - which includes plans to release one new EV brand each year until 2030.

“Latin America is an important future market for Volkswagen", VW CEO Ralf Brandstätter revealed. " Over the last two years, we have achieved a very good starting position in the region through a very consistent restructuring program.

"We are now driving the implementation of our "Accelerate" strategy with a major investment program, strengthening our competitive position in the region and thus gearing up for sustained profitability", he added.

However, the company has been in muddy waters of late owing to its refusal to sign an automotive pact pledging to phase out fossil fuels entirely by 2040. The "Route Zero" pledge was announced at the COP26 summit on November 10, five days following the investment announcement.

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VW has previously stated it will seek to be completely carbon-neutral by 2050 "at the latest", amid growing pressure from environmental activists as it seeks to mend its image following the dieselgate scandal. It has also previously announced a plan to phase out combustion engines in Europe by 2035, which is the final deadline for all automakers under the VW brand.

The company refers to its pledges towards carbon-neutrality as the "Way To Zero", which will also look into alternative biofuels in areas where charging infrastructure for electric vehicles is not widespread.

This new pledge confirms the company will be seeking the 2050 deadline for net-zero.

VW expects to turn a profit in 2021 in what it describes as a "remarkable comeback" into the Latin American market, partially attributed to a reduction in fixed costs and production capacity increases at its six major plants on the continent.

It will also be launching 20 new models for the South American market, all approved as part of its Accelerate strategy, the majority of which will be manufactured VW's plant in Brazil. The first of these will be a compact family car, set for launch in 2023.

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“With Way To Zero, we are committed to providing sustainable mobility for all", said Pablo di Si, the CEO of VW Latin America.

"Bioethanol is a meaningful regional complement to our electric strategy, because it reduces carbon emissions by up to 90% compared to gasoline. It is an excellent example of ‘think global, act local’", he added.

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