CEO Gaffe

VW's Electric Shock

  • Why it matters

    Why it matters

    Volkswagen’s long-term future as Europe’s largest carmaker will depend on how successfully it can build and sell electric cars.

  • Facts

    Facts

    • In an interview on Sunday, Volkswagen CEO Matthias Müller suggested among German consumers, there is little demand for electric vehicles, despite adequate supply.
    • Following VW’s diesel emissions scandal revealed last year, Mr. Müller launched a new strategy in June with the aim of becoming a major electric carmaker by 2025.
    • German customers are still hesitant to buy electric cars, with experts pointing to the very low number of German-made vehicles, poor range, and an inadequate charging infrastructure.
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    Audio

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VW's CEO Matthias Müller was criticized after his Sunday interview. Source: Philipp von Ditfurth / DPA

Volkswagen chief executive Matthias Müller has a truly impressive capacity for putting his foot in his mouth.

Early this year, on a U.S. tour designed to mend fences after the Dieselgate scandal, he managed to come over as arrogant and unapologetic in a radio interview. This week Mr. Müller did it again, giving an interview to a German Sunday newspaper which must have made VW’s public relations team wince.

Mr. Müller not only brusquely informed Volkswagen’s European customers that they would see no Dieselgate compensation and were probably freeloaders looking to cash in. He also managed to insult all German car buyers, suggesting they while pay lip service to environmentalism, they are too tight-fisted to pay for green cars. “There’s no lack of supply, the problem is with demand,” he said.

The VW boss’s remarks managed to unite Germany’s politicians: fresh calls for his resignation poured in from across the spectrum.

“Volkswagen only grasped that genuine electric cars exist when Tesla came along.”

Ferdinand Dudenhöffer, professor of automotive economics, University of Duisburg

Many observers have argued the very opposite of Mr. Müller: The German problem is not demand but supply. Germany’s automakers offer a narrow range of electric cars that are relatively expensive, with a charging infrastructure as yet unable to support long-distance driving.

Volkswagen is as guilty as any carmaker. Their cheapest small combustion-engine car, the VW Up, retails for €9,975, around $10,600. Its battery-powered version, the E-Up, goes for €26,900 – and that’s before any extras. And Volkswagen offers little in the way of choice. Compared to dozens of petrol and diesel-engined VWs, the company makes just two battery-powered models. High-end subsidiary Audi offers almost no electric cars. Budget subsidiary Skoda offers none at all.

Mr. Müller’s latest comments baffled experts across the automotive industry. “We have a classic supply and technology problem,” said Stefan Bratzel, professor at the Center of Automotive Management, an independent research institute. There simply aren’t attractive electric cars produced in Germany, he added: what was on offer was too expensive, with inadequate range and major charging problems. Mr. Müller was “way off base” with his comments, Mr. Bratzel said.

Ferdinand Dudenhöffer, professor of automotive economics at the University of Duisburg, was even more critical of German carmakers. “They only grasped that real electric cars exist when Tesla came along,” he said, referring to the California-based e-car manufacturer, which already has 400,000 pre-orders for its forthcoming Model 3. The German car industry had relied far too heavily on diesel engines and neglected the development of electric motors, Mr. Dudenhöffer said.

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German politicians of all stripes were quick to attack Mr. Müller. “It is counterproductive when a CEO attacks his customers, it reveals an attitude which won’t get results,” said Michael Fuchs, vice-chairman of the parliamentary party of the center-right Christian Democratic Union. He suggested that the state government of Lower Saxony, a major shareholder in VW, should make a public statement against the chief executive.

“Mr. Müller’s statements again show that members of the economic elite have lost their grip on reality,” said Klaus Barthel, of the center-left Social Democrats, vice-chair of the parliament’s economic affairs committee.

Johannes Remmel, a Green Party minister in North Rhine-Westphalia, Germany’s largest state, said Mr. Müller’s comments “revealed the whole problem with how Volkswagen’s leadership addressed Dieselgate. They failed to spot new technology, then they cheated, and then they covered up. And now they insult consumers,” he said.

VW declined to comment directly on Mr. Müller’s remarks. “We are working very hard on deficiencies in electric motors,” said a company spokesperson.

Indeed, despite Mr. Müller’s latest controversy, the company does have ambitious plans for the coming years. Volkswagen is not going to increase its electric-powered offerings in the short term, but new hybrid models, combining combustion and electric motors, are due to come on the market in larger numbers in 2018 and 2019.

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The Volkswagen I.D., presented by the company as a concept car at the Paris Motor Show in September, will probably not be available for purchase until 2020. The I.D. will have a battery-only engine, and a range of around 500 kilometers.

By 2025, the VW core brand should be selling 1 million electric cars per year, brand CEO Herbert Diess said on Tuesday at a press conference in Wolfsburg, where he laid out the details of the core brand’s new strategy. Handelsblatt had already reported Monday on VW’s new road map, dubbed “Transform 2025+.”

The strategy will first focus on reducing costs. It involves cutting 30,000 jobs worldwide by 2020 and developing new competencies, for instance in electric driving, as VW announced Friday. In the five years thereafter, VW will aim to become a volume producer of electric cars, Mr. Diess said.

The VW core brand would also rapidly expand its offering of SUV models, raising these to 19 in total by 2020 from 2 currently, the executive said. “In the United States, SUV’s will be the engine of our turnaround and in Europe compact SUVs will improve our margins.”

Nor has VW given up on the United States, where regulators first revealed Dieselgate last year and forced a more than $15-billion settlement with the carmaker earlier this year. VW would make “considerable investments in electric infrastructure” and would launch local production of electric cars in North America in 2021, the company said in a statement.

“We must grow in the United States. We are currently a niche player. We need to be respected there as a mass producer but it will certainly be more of a 10-year plan than a 3-year plan (to achieve this),” Mr. Diess said.

“Volkswagen failed to spot new technology, then they cheated, and then they covered up. And now they insult consumers.”

Johannes Remmel, Green Party minister, North-Rhine Westphalia

In Germany, it’s true that the uptake of electric cars has so far been limited among German motorists. If anything, demand seems to be falling as revealed by official figures for October, when just 2,600 new hybrid and electric cars were registered for use on Germany’s roads. That represents a 5-percent decline on the previous year. And compare those figures with continued German demand for combustion engines: 300,000 new petrol and diesel cars sold every month.

While electric cars remain expensive, the decline in demand has still puzzled experts. Since the summer, government incentives have been available for buyers of electric cars, but so far these appear to have had little effect. Only 5,800 applications have been made for the subsidy, far fewer than expected. “I didn’t think demand would be so low,” said Mr. Bratzel, the automotive economist.

The government’s incentive program intended to jump start a new era in motoring and put a further 300,000 electric cars on the road. A total of €4,000 is on offer to buyers of new electric vehicles, with the costs of the program shared between government and manufacturers. The subsidies are slated to remain in effect until 2019.

However, for most customers, the electric vehicles currently on offer do not present a real alternative to traditionally-powered cars. “The main problem is with range,” Mr. Dudenhöffer said. In attention, there is a shortage of charging stations where motor batteries could be recharged. Currently there are just 5,900 in Germany.

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What will be crucial is the development of fast-charging stations. According to the German Association of the Automotive Industry, or VDA, only 150 of these are currently available. Capable of recharging a battery to 80 percent levels in just 15 minutes, fast charging stations will be indispensable if drivers are to be convinced to make the switch to electric.

Whatever happens, it will be some time before German drivers enjoy anything like the facilities available in Norway where30 percent of all cars are now electric or hybrid models. It’s easy to see why, Mr. Bratzel said: “There there are genuine advantages for customers if they drive an electric car.” Because of high taxation on cars with combustion-engines, electric models are simply better value. In addition, charging infrastructure is much more developed, taking advantage of Norway’s plentiful hydroelectric power.

In Germany, an electric car boom still seems at least 4 or 5 years away.

 

Stefan Menzel is the managing editor of Handelsblatt’s website and closely follows the car industry. Dietmar Neuerer covers domestic politics for Handelsblatt from Berlin. Gilbert Kreijger, an editor with Handelsblatt Global, contributed to this article. To contact the authors: menzel@handelsblatt.com, neuerer@handelsblatt.com.

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