THE VOLKSWAGEN ELECTRIC VEHICLE GOAL TO BE THE NUMBER 1

The Volkswagen Group wants to become the number 1 electric vehicle (EV) manufacturer by 2025. The Group, which in addition to the Volkswagen brand, includes Audi, Skoda, Seat, Porsche and Lamborghini, has an impressive plethora of initiatives to succeed. 

​Those living in North America may see this goal as somewhat exaggerated since the Volkswagen brand’s North American market share was only 3.7% in Canada in 2018 and 2% in the U.S.  However, the Volkswagen Group is the second largest automotive manufacture in the world, after Toyota, with 40% of its global sales in Europe and 40% in China.
 
Three factors suggest the Volkswagen Group EV agenda should be taken seriously. 
 
One is the diesel scandal, which lead to a massive effort to improve Volkswagen’s reputation and overhaul its management.
 
The second factor is legislation initiatives in China and the European Union necessitate a rapid global transition of ALL global manufacturers to electric vehicles.   China is the largest vehicle market in the world and the European Union (EU) is the third biggest.  Together they represent 80% of the Volkswagen Group market. 
 
In effect, no global automaker can afford to ignore these two markets. That includes the U.S.-based Big 3 (GM, Ford and Fiat Chrysler) which must compete with other global manufacturers, even in North America.
 
The third factor driving VW ambitions is the success of Tesla, proving all pessimists wrong.   At the January 2020 World Economic Forum in Switzerland, Volkswagen CEO, Herbert Diess, said of Tesla, that Tesla is “paving the way.”
 
Accordingly, under its various brands, the VW Group is projecting to sell at 1.4M EVs/year by 2023 and 3 million electric vehicles per year by 2025 representing 20% to 25% of its global sales.  Between now and 2028, the VW Group plans call for producing 22M EVs under its various brands by 2028, half of which would be manufactured in China.
 
All of Volkswagen electric vehicles will be built on an electric vehicle-specific versatile MEB platform, which allows for the installation of a second motor for all-wheel drive.   To improve economies of scale, VW is open to sharing the MEB platform with other automakers.  For example, Volkswagen anticipates $10B in revenues from its MEB platform sharing agreement with Ford, the blueprint for future licensing initiatives.
 
In total, around the globe, Volkswagen will be retooling 8 plants for electric car production by 2022.

The Volkswagen ID Lineup
 
At the heart of the Volkswagen strategy to become number 1, three high-volume electric vehicles will join the new VW ID line-up over the next few years.
 
The ID lineup comprises the flowing vehicles: the ID.3, a 5-door hatchback compact to replace the Golf, with a range of 330 km to 555 km to be on the market of 29 European countries at a price $34,000 to under $45,000 by the middle of 2020, with a production rate of 100,000 units/year by 2020-21; the ID.4, formerly known as the ID Crozz, a cross-over compact; and the ID Buzz an electric VW mini-bus, to be launched in 2022.  There may be a delivery van version of the ID Buzz, something to be determined.  All ID’s will be available with over-the-air updates.
 
The ID.3 and ID.4 will be manufactured at the Volkswagen at the Zwickau, Germany facility, already converted to be dedicated to make electric vehicles.  The Zwickau facility is expected to reach a production of 330,000 vehicles in 2021, producing 6 new models under the Volkswagen, Seat and Audi brands, one new model to be introduced every 3 to 6 months.  Another German facility is scheduled for EV conversion during 2020.
 
Volkswagen will build the ID.4 and/or ID Buzz in the U.S. in Chattanooga, Tennessee, with first deliveries in 2022.  But before that, the ID.4 will be available in North America in late 2021 supplied from the German factory. 
 
At the lower sales volume category, there will be the Volkswagen ID Vizzion, a battery electric sedan with a range of 650km, a replacement for the Volkswagen Phaeton large luxury sedan, the size of a Passat.  It will be introduced in 2022 for the Chinese and European markets.  Nevertheless, the U.S. Tennessee plant may also produce the Vizzion.
 
Targeting China
 
No less than 40 electric and plug-in hybrids will be introduced in China under the Volkswagen, Audi, Skoda, SEAT brands and along with its Chinese partner Jianghuai Automobile Co. (JAC).   In total, Volkswagen intends to invest $16.7B in China in local investments, including R & D, by 2022. 
 
In 2019, the JAC Volkswagen Automotive Corporation agreed to build its first full scale electric vehicle factory at a cost of $750.8M in Hefei, Anhui, China, home to a joint R & D centre.   The Hefei facility will also build vehicles for another Chinese automaker, NIO.
 
Encompassing Volkswagen’s China initiatives are other partnerships. 
 
With Chinese partners FAW and SAIC, Volkswagen will offer three locally produced battery electric vehicles on China’s market in 2020 and intends to make avaialble 15 EV models by 2025 to meet the country’s sales/credits requirements.  Together, two FAW joint venture facilities in Foshan and a SAIC-VW plant near Shanghai, will produce 600,000 vehicles/year by 2025.
 
As well, the FAW partnership includes Audi models destined for the Chinese market by 2022 and the Connected Vehicles Research Institute regarding CASE or Connected, Shared, Autonomous and Electric vehicle technologies.
 
In March 2019, FAW and Volkswagen introduced to the Chinese market the e-Golf and e-Bora, each with a 270 km range. 
 
Audi
 
In total, Audi plans call for 20 all-electric models by 2025 and 10 plug-in hybrids.  For 2020, Audi hopes to sell 80,000 e-tron vehicles in 2020, but a shortage of battery supplies may impede that goal.  A coupe-like version of the e-tron, the Sportback, is planned for introduction in 2020.  At some further point, there will be a sedan version called the e-tron GT.
 
Porsche
 
Porsche expects 50% of its sales to be electric vehicles by 2023 in keeping with its plans to spend $7B on electrification initiatives by 2022.  The 2022 goal includes $1.15B for the electrification and hybridization of its existing models. 
 
The Porsche all-electric Taycan had 30,000 order reservations by July 2019, hence Porsche is considering doubling the production of its 4-door sedan to 40,000 units/year by assigning its Leipzig facility to this vehicle, in addition to the current only Taycan production plant in Zuffenhausen. 
 
Porsche is also working on a SUV built on the Taycan chassis, the Cross Turismo.
 
Trucks
 
As for Volkswagen trucks, MAN, the heavy-duty truck division of Volkswagen, is expected to launch electric semis with a gross vehicle rate weighting of 12 to 26 tons in 2021; and is working on pilot projects with its e-Crafter vans in various places in Europe.
 

 
Batteries: Outsourcing versus In-house
 
For now, the battery suppliers for the Volkswagen Group are LG Chem, SK Innovation, Samsung SDI and, for its China division, China’s CATL.  But ultimately VW wants home-grown independence. 
 
To this end, VW plans to build a battery facility in Salzgitter, together with Northvolt, that will eventually be capable of producing 24 GWh of batteries a year.  Volkswagen already has a Centre of Excellence and a Component Centre in Salzgitter which handles battery competencies, including recycling and R & D.  This fits in with the May 2019 Volkswagen announcement that it would invest $1B in a pilot battery cell facility in Europe, the most likely site being Salzgitter.
 
Objectives and Skepticism
 
Putting all the pieces of the puzzle together, the combination of hopes to become the number one EV manufacturer and reduce its manufacturing carbon footprint, the Volkswagen Group aims to be carbon neutral by 2050. 
 
One could be skeptical about all this since most of the preceding information is about plans and these plans, including targets, keep on changing.  
 
Apart from the low-volume sales e-Golf, the Volkswagen Group has yet to put its mass market ID vehicles on the roads around the globe.  Nonetheless, whether or not the Group will achieve the number one EV manufacturer status, the slope is high to become a major EV player.   
 
To achieve the goal of being the number EV manufacturer by 2025, VW has an advantage over Tesla in terms of existing and near-future manufacturing capacity.
 
That said, VW also has the same problem as all legacy automakers, the turning of the Titanic syndrome.  Having to scrap a century of investing in improving the performance of internal combustion engines (ICE); invest in developing electric, entirely different, powertrains; design vehicles to accommodate the new powertrains; and revamp the ICE-based corporate organizational structure, is no small feat.  That’s an awful lot of stranded assets and hurdles to accompany an aim to maintain or improve sales levels.  These are high expectations, especially considering  it may take years to get a return on the above-mentioned massive investments and changes.  Moreover, the ID lineup comprises sleek attractive vehicles that are a major departure from the more banal designs from VW for which we have become accustomed. 
 
On the other hand, European Union and China legislation leave Volkswagen with no choice, especially since 80% of its sales are in these two markets.  There lies the incentive to turn the Titanic on time to avoid sinking.  As stated by the VW CEO, Herbert Diess, the alternative is to end up like Nokia.

Author : Will Dubitsky