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Volkswagen’s truck unit to pour $2.2B into software, electric vehicles

(Bloomberg) --Volkswagen AG’s Traton truck division plans to spend more than 2 billion euros ($2.2 billion) over the next five years on electric vehicles and digital offerings in a bid to keep pace with the industry’s “radical” transformation.

The plans come three months after the world’s largest automaker pushed through the unit’s stock market debut to fuel an ambitious global expansion outside its main European market. At the same time, the truckmaker, comprising Sweden’s Scania and Germany’s MAN brands as well as a subsidiary in Brazil, needs to comply with stricter emissions rules for carmakers and truckmakers alike.

“The reduction of CO2 emissions is probably the biggest challenge for mankind, our industry, for our customers -- for every one of us,” Traton chief Andreas Renschler said Wednesday in a prepared speech. “It affects a huge, complex ecosystem, and transport is a core element of that.”

Andreas Renschler at Traton's IPO in Frankfurt. Photographer: Alex Kraus/BloombergThe weight of trucks and the goods they transport has so far prevented a similar shift toward battery-powered vehicles as with passenger cars. Global leaders Daimler AG and Volvo AB embarked on selected vehicle projects and Tesla Inc. has been plotting to launch a semi truck as well, while details remains scarce.

Radical Changes

Investors remain cautious so far about Traton’s prospects, with some analysts favoring Swedish peer Volvo following a successful restructuring in recent years. Traton stock lost about 10% since shares started trading at 27 euros in late June. Still, it has 9 buy ratings, 6 hold and no sell recommendation among analysts tracked by Bloomberg.

Renschler acknowledged “a more and more challenging market environment, and less growth predicted in the outlooks of the markets” during at a briefing in Soedertaelje, Sweden. But he said Traton remains “confident”. Truck manufacturers are prone to large cyclical swings as demand for transportation of goods is often a yardstick for the broader economic trends.

Scania AB Truck Production As Traton SE Set IPO Pricing

He forecast “radical changes in the transport industry,” predicting that “the entire business and its players will consolidate and adapt to new business models.” Traton expects a third of its trucks or buses in the next 10 to 15 years could have new engine technologies. Most will be fully electric, if the required charging infrastructure is in place across Europe. Current battery technology development is “rapid and substantial,” he said.

At the same time, development of self-driving trucks for use in mines or ports has already been more encouraging than efforts to roll out software in cars that can navigate busy public roads safely on their own.

Scania showed a concept truck dubbed AXL in Soedertaelje, which lacks a cab for a driver. Since last year, Traton’s most profitable unit has deployed a self-driving truck in use at a Rio Tinto mine in Australia. Later this year, it plans to start a project with an electric, self-driving bus in the Stockholm area.

MAN will soon start a project in Hamburg where trucks drive partly autonomously to the German city’s port. Upon arrival the driver leaves the vehicle and the truck continues to drive autonomously to the container terminal and back after unloading.