Volkswagen plans to invest up to €1 billion (approximately $1.2 billion) in artificial intelligence by 2030

Volkswagen Group, the German automotive giant, has announced that it plans to invest up to €1 billion ($1.2 billion) in artificial intelligence (AI) initiatives by 2030 amid ongoing transformations in its key markets in China and Germany.

According to the German carmaker on Tuesday, it will not only invest up to a billion euros ($1.2 billion) in artificial intelligence by 2030, but will also focus on integrating the technology into every aspect of its business in a bid to unlock billions in savings.

The announcement came on the first day of the IAA car show in Munich, which is regarded as Europe’s biggest.

Volkswagen’s CEO shares big AI plans

Volkswagen’s investment will be funneled towards AI-supported vehicle development, industrial applications, and the expansion of high-performance IT infrastructure, according to reports.

The company expects the move will have saved them up to €4 billion ($4.7 billion) by 2035.

The announcement comes at a critical time for the German group. It is currently in the middle of deep changes to its two main markets, China and Germany, as it steps back to work on new models and major cost cuts.

On Sunday, it unveiled a concept for a new small electric SUV, tagged the ID.Cross, and touted as part of the automaker’s push to offer affordable battery-powered vehicles.

Volkswagen expects AI to significantly accelerate the development process for new vehicle models and technologies.

“For us, AI is the key to greater speed, quality and competitiveness – along the entire value chain, from vehicle development to production,” Hauke Stars, chief IT executive, said.

Volkswagen’s products will be heavily influenced by regional markets

The Volkswagen Group is facing several challenges right now. It not only has to figure out its vehicle’s software, but it also has to invest in new technologies like autonomous driving while struggling to stay ahead of fierce competition in China, increased tariffs in the United States, and maintaining the competitiveness of its whole portfolio of cars.

“The automotive industry, and especially Volkswagen, have never faced so many headwinds at the same time,” Oliver Blume CEO of Volkswagen told reporters at IAA Munich.

However, he also admitted that the auto show is a sign the Volkswagen Group is making progress on several fronts, including the launch of a new set of compact and affordable EVs for Europe, like the Volkswagen ID.Cross and the upcoming ID.Polo.

In the past, his company got by selling the same kinds of cars everywhere—a model that’s driven everything from its ill-fated push for diesels in America to its global rollout of the ID. electric cars.

However, he said the Volkswagen Group’s products now need to be more regional in their focus.

“Our business, over decades, worked for the Volkswagen Group to develop and produce a majority [of cars] in Germany, and then bringing the cars with one standard all over the world,” he said. “This model doesn’t work anymore.”

From here on out, the German carmaker will tailor solutions to its problems in respective regions. In the US, it can not afford to pay tariffs and pay for its high investments there, so Blume continues to hope the US government will offer support.

For China, where the Volkswagen Group was an early pioneer but lost significant sales to new local players, it announced a partnership with Xpeng for electrical architectures and other automakers to make cars suited to those markets.

In Europe, where regulators continue to push for a plan to ban the sale of new combustion-powered cars by 2035 despite significant industry protest, it plans to continue adding more new EVs across new price points.

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