What Volkswagen’s Big EV Bet Tells Us
Matthias Mueller, Volkswagen Group’s chief executive, last week said his company plans to sell as many as 3 million plug-in electric vehicles per year by 2025, representing as much as a quarter of the company’s total projected sales. Let's put that in perspective. In the span of about two product cycles, VW plans to sell in a single year at least twice as many plug-in cars as exist today on Planet Earth.
Mueller said the company will introduce more than 30 new EV and plug-in hybrid models by that time. Last year, VW pledged to offer 20 plug-in models by 2020, but had been less explicit in establishing how much of its core business they would represent.
Since the revelations of its diesel emissions scandal last year, the Volkswagen Group has:
- Released the Audi A3 E-Tron plug-in hybrid
- Boosted the range of the VW E-Golf by nearly 50 percent
- Shown off a new VW plug-in hybrid crossover concept, and unveiled a plug-in hybrid version of the Touareg
- Announced an Audi Q6 crossover EV with 300 miles of range
- Spilled the beans on an all-electric version of the Audi Q5 that’s due in 2018
- Promised an improved redesigned plug-in hybrid version of the Porsche Panamera
- Showed a Porsche electric sports car with the capacity to charge its 300-mile battery pack to 80 percent in just 15 minutes
- Confirmed plans to produce “the Volkswagen for the digital age,” which will have the same 300 mile- range and brief charge time
This isn’t the kind of movement typically seen in an industry known for incremental change and a myopic clinging to core revenue drivers. For Volkswagen though, sticking with what works is simply no longer an option. Fallout from last year’s diesel emissions scandal continues to be a drag on the German auto giant’s sales, and a toxic element for its brand. Shareholder and customer anger continues to mount.
To stop the bleeding, VW is apparently trying to transform itself from a massive manufacturer that uses electric vehicles as a halo—and a counterweight to its sooty diesel offerings—into a forward-thinking auto company that fully embraces the vision of transportation powered by electric propulsion.
Handelsblatt, a German business journal, on Tuesday reported Mueller clearly indicating that VW is considering abandoning diesel engine development altogether for its consumer vehicles. “Against this background,” Mueller told the journal, “We have to ask ourselves whether we want to spend more money on the further development of diesel.”
Good News For Plug-in Buyers
It’s been less than 15 years since electric vehicle activists offered themselves up for arrest in acts of civil disobedience aimed at convincing carmakers to not destroy a sizable portion of the then minuscule existing plug-in vehicle fleet in the United States. Today, with carmakers like Volkswagen planning massive ramp-ups in plug-in vehicle production, legions of potential EV buyers are in a great position.
A confluence of factors have since emerged to promise a pending golden age of EV choice—with dozens of models from as many brands available across nearly every category of light-duty vehicle. All the while, buyers will benefit from a market in which every carmaker is compelled by law to compete for demand that is subsidized to the tune of up to $7,500 per vehicle by the federal government.
Volkswagen’s drastic pivot is a much more radical version of the one performed by American automakers in the wake of the 2008-2010 auto bailouts. US carmakers that had scoffed at the idea of commercially viable plug-in cars suddenly found religion in a time of desperation.
However, Volkswagen’s recent pledge isn’t just to offer a few plug-in models—it’s to sell them by the millions. The level of risk necessary to meet these ambitious product and sales goals by 2025 dwarfs the gamble that, for example, General Motors accepted during the bailout days. Today, investment from carmakers, governments and utility providers has reached a point of no return. Electric vehicles are not only here to stay. They are, at this point, too big to fail.
That’s especially true of Germany’s Volkswagen Group, which just one year ago was the world’s biggest carmaker by sales volume. In order to recapture that superlative, VW must now become a leader in the electric vehicle market.
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