Several private equity firms are exploring a majority stake in Volkswagen AG's heavy diesel engine unit, Everllence SE, people familiar with the matter told Bloomberg. The German automaker is actively selling assets to raise capital. This move is part of VW's broader strategy to streamline its portfolio and fund a costly shift toward electric vehicles.

Everllence, formerly known as MAN Energy Solutions, manufactures large-bore diesel engines for ships and power plants. For Volkswagen, selling this division could generate billions in cash. The company needs every euro to finance its massive EV development programs and compete with rivals like Tesla and Chinese automakers. Shedding a legacy combustion-engine business is a logical step in that transition.

Interest from buyout firms suggests the unit is viewed as a valuable, cash-generating asset despite the long-term decline of diesel. A deal would mark a significant step in VW's disposal program, which also includes potential initial public offerings for other brands like Porsche. The company is under pressure from investors to improve returns and clarify its complex corporate structure.

The sale process is still in its early stages, and a final decision hasn't been made. Volkswagen will need to balance a attractive sale price against the operational challenge of separating the unit. For private equity, acquiring a leading industrial engine maker offers stable revenue, but they must also navigate the energy transition's impact on future demand.