Ion Yadigaroglu

Capricorn CEO: VW Should Only Build E-Cars in U.S.

Tesla xcar Source DPA
Should VW build them too? The new Tesla X model in September, 2015.
  • Why it matters

    Why it matters

    More investment in battery technology will drive the price of electric vehicles down, according to a major investor, who suggests VW’s fine be converted into investment for the technology.

  • Facts

    Facts

    • Tesla aims to make e-cars available on the mass market; it is also investing in battery manufacturing facilities.
    • In the recent VW scandal, the carmaker admitted to manipulating software to suggest emissions for 11 million cars were lower than they are; Volkswagen may face fines of $10 billion.
    • Capricorn Investment is a privately owned investment company which manages $4 billion.
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    Audio

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Ion Yadigaroglu is a big believer in the future of electric cars. The Capricorn Investment Group, which he leads as chief executive, claims to be one of the largest clean-tech investors. It is engaged especially with new battery technologies, an area where some in Germany are pushing automakers to compete more seriously.

In general, Capricorn specializes in sustainable investments and manages, among other things, the assets of the philanthropist and former Ebay president, Jeff Skoll. Mr. Yadigaroglu talked to Handelsblatt about Tesla, where Capricorn is a major investor, as well as the barriers to e-market car growth and his hopes for the future of this industry.

 

Handelsblatt: Mr. Yadigaroglu, are you happy about the scandal at VW, as a Tesla investor?

Ion Yadigaroglu: I never thought about it that way. It’s a massive market and there’s never been anyone at Tesla who would think of the demise of competition as an opportunity. It’s not as though by removing one option from the competition that even more people are going to buy Teslas. Tesla’s founder Elon Musk would be absolutely delighted if there was very strong competition.

Why?

He is so confident that they can continue to have an outstanding product and they can continue to innovate that for him, the issue is, how do you get more people to drive EVs [electric vehicles], to reduce some of these barriers to growth and scaling.

You mean battery availability?

The number one bottleneck to EV is batteries. It’s crazy. It’s not the lack of technology, there’s a lack of capacity to produce enough batteries. That forces the company to build its own battery factory. Many people think that’s risky but it’s necessary.

Do you think that the VW emissions scandal could speed up the switch to electric vehicles?

If the problem turned out to affect a small number of diesel vehicles that happen to be sold in the U.S., then you could say it has no bigger meaning. But what I think is happening is that people are realizing it’s really something that speaks to the entire clean diesel story. And that there is a struggle to deliver fuel economy and emissions reductions while achieving the performance and costs that consumers want. There’s only so much that you can squeeze out of a liter of diesel to create some magic. And despite having achieved enormous gains and being a leader of this, Volkswagen was no longer able to comply.

You have an unusual idea about how to penalize VW in the United States.

Just briefly, instead of paying billions in penalties, in five years, VW should be forced to sell only e-cars in the United States. That would completely eliminate the emissions for millions of cars. There is currently talk of $10 billion in penalties. Don’t just waste [it], instead go build two factories with that and employ so many thousand people. And if you also require VW to set up charging stations along the highways. Then we would significantly improve the transportation system in this country.

That sounds crazy.

The some 500,000 diesel cars affected in the United States account for less than 0.5 percent of nitrogen-oxide emissions. There are 250 million vehicles on America’s highways. VW’s diesels are a tiny fraction! If VW spends billions to solve this problem – to pay fines and compensate the claimants – that seems like a completely pointless exercise. No-one wins other than the lawyers.

Could Volkswagen manage to achieve that?

The company is already giving more priority to e-cars. One example is the Phaeton, which is supposed to be fully electric in the next generation. If you take all of Tesla’s spending, that’s $3 billion. Imagine what could be done with $10 billion.

What are the chances your suggestion will be picked up?

Realistically, I don’t think it’ll happen. It would require some serious courage. But I wouldn’t just create something and then leave it like that. Right now we’re working to pull together a group of investors and business people; we don’t only have the EPA [Environmental Protection Agency], the California Air Resources Board might be open to an idea like that. My hope would be that there is some interesting creative solution forming around CARB’s reaction to this – that in California, we may find an interesting solution to this problem.

You are a major investor in battery technology. Can VW and other carmakers hope for better batteries ahead?

There’s real innovation in batteries, there are some new things that are not certain yet, like exactly at what price and what volume they can be manufactured. But there are definitely possible options that will outperform standard lithium cells. I can’t be specific but venture guys like us have our favorite choices and our competitors have their favorite choices. But only one of these has to be real for Volkswagen to get the chance to leap ahead.

 

Astrid Dörner is Handelsblatt’s finance correspondent reporting from the United States. To contact the author: adoerner@handelsblatt.com

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