There have been quite a few reports suggesting the Volkswagen Group has ambitious broad-reaching plans to electrify its global model lines but questions remain.
These include whether the world’s second-largest automaker – as it seeks to fix its damaged image from its diesel emissions cheating scandal – will threaten Tesla, not to mention General Motors, BMW, Nissan, Toyota, and, well all major automakers.
The Volkswagen Group globally has nine plug-in electrified models, with plans to produce 20 more by 2020. By 2025, in order to meet increasingly tough emissions regulations, it has said it will need to sell one million plug-in cars annually.
That the Volkswagen Group is not a Tesla is at least certain, even as it prepares three-and-counting ostensible Tesla competitors – the 2017 Audi R8 e-tron, 2019 all-electric Audi Q6 crossover, and 2020 Porsche Mission E sedan.
While Tesla eschews petroleum, Volkswagen’s intent since last decade was to show the world it could produce “clean diesels,” and now it is faced with recalls and suits for an estimated 11 million vehicles scattered among its global brands.
According to an Auto Fuels Coalition study, by Roland Berger and sponsored by Volkswagen and Shell Oil, an increased use of biofuels, CO2 car labeling, and an emissions trading system (ETS) in the EU will help meet emissions targets through 2025 and beyond.
While plug-in cars are part of VW’s plans, Ulrich Eichhorn, VW’s new head of research and development told a meeting in Brussels diesel will be too.
“Modern diesel and natural gas engines will absolutely be required to deliver CO2 targets until 2020, and they will also contribute to further reductions going on from there,” he said.
The Guardian UK interpreted the study as an audacious message from the embroiled automaker and a major oil company attempting to “block” the EU’s push for electric cars, even as VW sorts out the aftermath of diesels that can emit as much as 40-times NOx.
Diesel exhaust can be cleaned to meet regulations with enough after-treatment controls and thus expense, but it’s generally agreed electrification will also be necessary.
“It’s simple — the CO2 legislation in the various regions will mean every OEM is compelled to offer e-mobility,” said Thomas Lieber, VW brand’s head of complete vehicle development for electrified cars in an article by Automotive News.
Potential To Do It
For all the ire some have directed toward the Volkswagen Group, it still managed to book profits 15-percent above analysts’ expectations in its first quarter this year, and it stands to sell more cars during 2016 than world-leader Toyota, albeit less profitably.
Although the core VW brand saw profits plunge 86 percent, credit highly desired Audi and Porsche, plus MAN and Scania trucks and other lines for carrying a lot of this profitability, said Michigan-based analyst Alan Baum.
And, said Baum assessing its strategic position at this stage, Volkswagen Group’s yet-vague electrification goals can’t be easily dismissed.
While Tesla is in a race toward profitability, and aspires to multiply sales from 51,000 cars last year, to 500,000 in 2018, and as many as one million in 2020, Volkswagen already will sell 10 million vehicles this year.
For VW to make the one-million PEV projection for 2025 – assuming it can make compelling vehicles and sell them – would mean paring off a mere 10 percent of its global production to electrified vehicles.
It already has the manufacturing capability, knowhow, and money to do this.
To help with the need for compelling cars that people will buy, the company is presently mulling what potential it has in further developing a modular MEB platform which would be a form of skateboard chassis as used with other successful purpose-built EVs.
This battery in-floor architecture could support EV ranges up to 310 miles, said VW, and would be relatively cost effective.
Volkswagen has already shown its manufacturing savvy compared to the likes of BMW by making its converted e-Golf EV, and Golf GTE PHEV on the same assembly line as conventional Golfs with only an extra hour required per car.
By contrast, BMW is more-heavily entangled at this point with high fixed costs and limited sales for its relatively exotic carbon fiber reinforced chassis i3 and i8 built on dedicated assembly lines.
The MEB platform with modular battery as well is an adaptation from another modular platform, the MQB, and could speed design and production of electric cars assuming the market expands later this decade into next.
Baum notes that as a relatively deep-pocketed player, Volkswagen can afford to throw on the wall what it thinks might work, and see what sticks as it floats the enterprise with conventional cars.
To control battery costs, Tesla has famously committed to a “Gigafactory” costing up to $7 billion, but Volkswagen is reportedly mulling one in Europe that could cost as much as $11.1 billion (10 billion euros).
This has not been green lighted, and was reported by German publication Handlesblatt.
Volkswagen has said the story contains conjecture, but the news is being taken as something to be potentially approved by a board meeting later this month.
A Bit of Hype?
After interviewing several VW managers following a meeting in Wolfsburg mid May, journalist Bertel Schmitt wrote in Forbes that he was unconvinced that a clear direction is even being contemplated by new CEO Mathias Muller.
Among the bold projections include talk of major potential growth for digitization that could make not just Toyota and Tesla be concerned, but even Apple might have to look over its shoulder in this market.
The event was also written about by German-language publication BILD, and Schmitt characterized the big plans as a rite of passage for the incoming CEO who outlined his “Strategy 2025” whereby VW charts its next nine years.
A similar spirit in “Strategy 2018” issued by former CEO Martin Winterkorn also intoned the prospect of the Volkswagen empire to further exert its world dominance, and it at least partially met some of those goals.
The new chief’s first goal in May was to “close the ranks” of its top officers, get them on board with the new forward-looking plan, prior to a formal announcement yet to come.
According to BILD, Muller’s Strategy 2025 goals are:
• Break up the previous hierarchy and improve the organization
• Change Volkswagen from the ground up
• More “autonomy” for its twelve core brands
• Make cheaper models
• Reduce costs and increase profitability
• Increase digitization and car-related services
And, of course, Muller emphasized a commitment to electric mobility.
Managers interviewed by Schmitt spoke of “a lot of insipid speech balloons” and lack of true direction, leadership, originality, or inspiration.
Also vague was how much the electrification thrust would consist of conventional hybrid electric vehicles, with note that Toyota will produce 1.5 million this year, so a million of these would be no big deal. Automotive News however has said the one million cars will be the plug-in variety.
As for digitization threatening Apple? One participant of the managers’ meeting characterized Muller’s grand vision:
“This is the world our developers live in: 1.) Volkswagen generates exclusive ecosystems. 2.) Volkswagen is the gatekeeper to these ecosystems. 3.) We have many millions of customers around the world, and they will line up to become part of these ecosystems. 4.) The ecosystems are self-learning. 5.) We will control both the hardware, and the data. We will starve and eventually take over Apple.”
Fat chance? Maybe, but Volkswagen has otherwise been known to play its hand close to its chest lest competitors get too clear a picture, and it has been suggested it could be willfully obfuscating a serious plan to go big in emerging sectors.
Volkswagen Group to date is not a major seller of plug-in electrified cars.
This year it expects to build around 12,100 e-Golfs and 13,400 Golf GTEs, and total cumulative sales electrified vehicle sales volume by year’s end could be 103,000 units.
Globally, plug-in models now consist of the VW eUp, e-Golf, Golf GTE, Passat GTE, Passat GTE Sportwagen, Audi A3 eTron, Q7 eTron, Porsche Cayenne S E-Hybrid and Panamera S E-Hybrid.
Four of these are sold in the U.S. – the e-Golf, A3 e-tron, and the two Porsche plug-in hybrids.
More To Come
Volkswagen needs to clean up its image, improve its market profitability, and while billions in potential fines and suits are yet to be determined over the diesel emissions cheating, it does not appear in danger of financially sinking.
Reports have also suggested that the automaker is cutting deals with regulators to commit to more electrified vehicles to counter the damage and breach of trust it has done with “Dieselgate.”
On June 22 will be the company’s annual meeting. Whether the battery factory or more concrete plans are announced then or later will remain to be seen.
Clear is Volkswagen is heading in this direction, and indicators are it will want to be a world leader as it focuses its considerable resources on that goal.