Volkswagen AG share price up, beefs up investments to $106 billion through 2019

The largest cars, vans and heavy trucks maker in Europe – Volkswagen AG – intends to expand its investments into new vehicles, technology and factories in an attempt to surpass Toyota Motor Corp. as the worlds largest auto manufacturer.

The Chief Executive Officer of the company Mr. Martin Winterkorn said in a statement on Friday: “We will continue to invest in the future to become the leading automotive group in both ecological and economic terms. Development costs will remain high in the future as a result of high innovation pressure and increasing demands on the automotive industry.” Mr. Winterkorn also added: “As a Group, we have the expertise and financial strength to continue to extend our technology leadership and to reach our goals for 2018.”

According to Volkswagens statement, the Germany-based company plans to pour in €85.6 billion ($106 billion) over the next half a decade as investments. The plan translates into raising the average annual spending on automotive operations to €17.1 billion per year, compared to the previous five-year budget of €16.8 billion.

Volkswagens Chinese joint ventures, which arent consolidated in the groups results and therefore not included in the investment figure, will increase investments to €22 billion over the next five years, financed through the ventures cash flows. This will raise the groups total budget to €107.6 billion, compared to €102.4 billion under the previous plan.

Capital spending will be boosted in the range from 6% to 7% of revenue and the investments will be aimed at developing more efficient vehicles and production methods.

About €41.3 billion will be invested in developing sport utility vehicles, hybrid and electric drives, while €23 billion will go toward expanding capacity at VWs factory in Poland, the new Audi plant in Mexico and other facilities. The company has also planned to launch new models and new generations in almost all of its existing vehicle classes.

Mr. Winterkorn also shared his expectations that the auto manufacturer would sell more than 10 million vehicles in 2014 for the first time, four years ahead of the initial plan.

Volkswagen AG rose by 2.04% on Friday in Frankfurt to close at €177.95 per share, marking a one year change of -9.02%. The company is valued at €82.73 billion. According to the Financial Times, the 29 analysts offering 12-month price targets for Volkswagen AG have a median target of €215.00, with a high estimate of €260.00 and a low estimate of €150.00. The median estimate represents a 20.82% increase from the last price of €177.95.