Volkswagen delays key EV project as Tesla challenge stumbles

Volkswagen AG’s ambitious push to supplant Tesla Inc. as the global electricvehicle leader is running into trouble.

Chief Executive Officer Oliver Blume plans to push back the key Trinity battery car project from 2026 toward the end of the decade because new software won’t be ready in time, according to a person familiar with the matter. The company may also scrap plans for a €2 billion ($2.1 billion) EV factory in Germany, the person said, asking not to be named because the discussions are private.

The delays complicate Volkswagen’s bid to catch up with Tesla and lay bare the challenges of overhauling Europe’s biggest automaker, from retooling factories to fixing buggy software that has frustrated drivers of its electric cars.

Volkswagen “currently is taking the opportunity to look at all projects and investments and check them for viability,” the company said in an internal message to employees seen by Bloomberg. A spokesperson declined to comment further.

Construction for the new plant near VW’s sprawling Wolfsburg facility was due to start next year, with first Trinity models rolling off the production line from 2026. The decision to add a brand-new site was part of former CEO Herbert Diess’s bid to become more efficient and produce EVs faster.

Blume’s overhaul “could improve free cash flow at Volkswagen, but potentially delay electrification and crucial product launches,” Bernstein analysts led by Daniel Roeska said in a note, adding that the carmaker should brief investors “sooner rather than later” on any strategy changes.

Diess, whom Blume replaced in September, last year unveiled aggressive strategies for EVs, software and new-mobility offerings.

Blume has to walk back some of those targets because they’re unrealistic, the person said, adding that the details of the changes are still being worked out.

Tesla sold more than twice as many fully electric cars than Volkswagen in 2021, and its CEO Elon Musk has christened new factories this year in Austin, Texas, and near Berlin. Still, VW has been working hard to catch up. The manufacturer raised a tidy sum in September with the €9.4 billion Porsche initial public offering, and has earmarked some €52 billion through 2026 for projects including setting up six battery factories across Europe.