Industry transition

Charging into electric cars

main 70217330 Reuters – Herbert Diess VW brand CEO presents new strategy 2025 electric cars Nov 2016 Wolfsburg HQ Beetle Golf ID e-car dieselgate
VW’s next bestseller will be electric, honest. Source: Reuters

If Tesla’s rising popularity didn’t wake up German carmakers, Dieselgate did. Volkswagen’s diesel emissions scandal shocked the public in 2015 and eventually rudely awoke the manufacturers of VW, Audi, Porsche, BMW and Mercedes cars. In the past two years, the global leaders in their markets have all launched new strategies to boost electric car production and counter the falling popularity of diesel vehicles, which face bans in major European cities because air pollution is too high.

Two weeks ago, the head of VW’s core brand, Herbert Diess, chose a very Californian backdrop for his announcement of a new electric van. In Pebble Beach, with the Pacific Ocean in front of him and the iconic Highway 1 behind him, he described the new all-electric ID Buzz. Volkswagen achieved cult status with its iconic minibus of the 1960s, which became known as the hippie bus, and is looking to recapture some of that magic with the Buzz.

The ID Buzz is part of VW’s large-scale strategy to leap into the electric age and drop the dead weight of its diesel manipulation scheme. The company first unveiled its electric brand, the ID, at the Paris Motor Show last September. The first model, the Neo, is a compact car similar to VW’s best-selling Golf and is slated for release in three years. Shortly thereafter, the Crozz will be released to meet the growing demand for off-road vehicles, and then the Buzz is to be launched in 2022. Then there are plans for a Passat-like sedan called the Aero. This takes VW’s electric model range plans up to 2025. An Aero will be on display mid-September at the International Automobile Exhibition in Frankfurt.

“We see Volkswagen as the company that can stop Tesla because we have the skills that Tesla does not have today.”

Herbert Diess, VW brand chief

BMW and Mercedes-maker Daimler have also announced new electric car plans. By 2020 at the latest, the German auto industry hopes to have caught up with Tesla, the Silicon Valley-based electric carmaker founded in 2003. It was the world’s second-largest seller of electric or hybrid cars last year, while BMW, surprisingly, came in third, according to a McKinsey study. China’s BYD, partially owned by Warren Buffett, was the world’s biggest, benefiting from local state-sponsored subsidies.

Tesla hasn’t turned a profit yet, and in all of 2016 it only built as many cars as Volkswagen does in three days, but the Californian disruptor has shown the German auto industry that there’s a demand for electric cars. Potential bans of diesel cars in major European cities have caused diesel sales to fall in Europe, especially in Germany, forcing carmakers to come up with alternatives.

But switching to electric costs time. It takes at least five years from development to launch. Nevertheless, hardly a week goes by without BMW, Daimler and Volkswagen highlighting a new electric car idea. By 2025, “we will be the leading supplier of electric cars in the premium market sector,” Daimler CEO Dieter Zetsche has promised. The Mercedes-maker has been mass-producing fully electric cars since 2009 with its small city car brand Smart, but it never gained the popularity Tesla enjoys. Daimler is stepping up its game, launching its electric subcompact Smart car this summer, followed by its new electric sub-brand Mercedes EQ in 2019. Mr. Zetsche has in fact advanced the timetable for the introduction of 10 EQ models to 2022 from 2025 originally.

01 p48 Cranking up Germany’s Electric Car Production 1-01

The luxury carmaker has watched the mistakes of its archrival BMW. The BMW i3 has been on the market since 2013 and only seen lukewarm sales. With a range of 130 kilometers in the first generation and a barely existing charging network, the i3 is an exotic bird. BMW chose a carbon-fiber body that makes the car a bit lighter, but also pushes the price to €35,000 ($41,600). The i3 also requires its own production structure, which doesn’t scale well.

That’s why BMW has also changed gears. CEO Harald Krüger had planned to launch a new electric car in 2021 with the iNext, but he has moved forward his own plans. The Electric Mini, which will be built in Oxford in 2019, will be the first, followed by the electric compact off-road X3 in 2020. In the future, all BMW model series will be designed so that they can take an electric drive, starting with the 3 series, BMW’s best-seller. By 2025, as many as a quarter of BMW or Mini sales could be electric – around 500,000 units per year.

Volkswagen’s luxury subsidiary Audi will be building its off-road vehicle e-tron in Brussels next year, with a coupe to follow quickly thereafter. By 2025, it will have developed at least five electric cars, together with VW and the sports car subsidiary Porsche. The latter plans to launch its first electric version in 2020, the Mission E.

So, for Germany at least, the race for the supremacy in the age of the electric car has just begun. The carmakers also hope to leverage their experience in mass production. “We see Volkswagen as the company that can stop Tesla because we have the skills that Tesla does not have today,” VW brand chief Diess said confidently in California two weeks ago. In fact, VW has never been first when it comes to technical innovation, but it has seen great successes in the mass market. That’s how VW managed to survive well into the 70s based on the success of the VW Beetle, a vehicle developed before World War II. Its competitors had long moved in a different direction before VW changed its approach and developed the Golf and the Passat, the kind of paradigm shift that electric cars could bring to Volkswagen and the entire German car industry. If they don’t succeed, one of Germany’s leading industries could face decline.

01 p48 Cranking up Germany’s Electric Car Production 2-01

Markus Fasse writes about the auto and aviation industry for Handelsblatt. To contact the author:

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