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Likening his company to a "supertanker…picking up speed," Volkswagen CEO Herbert Diess said Tuesday that the automaker is increasing by 50 percent the number of electric vehicles it plans to produce over the next decade.
The goal is to build 22 million battery-electric vehicles, or BEVs, over the next decade, up from a previous target of 15 million, he said. The move is widely expected to put a strain on the German automaker's bottom line. Profit margins on electrified vehicles are significantly below conventionally powered products with many all-electric models sold at a loss, according to industry analysts.
The announcement made by Diess during the automaker's annual news conference underscores the rapid shift in focus for a company long dependent on diesels. VW has been shifting away from so-called oil burners since acknowledging in 2015 that it rigged emissions tests on vehicles using several of its diesel engines.
The automaker has since paid more than $30 billion in fines and settlements. It has also seen a sharp decline in sales of diesel-powered products, the VW brand itself no longer offering them in the critical U.S. market. Electric vehicles are expected to pick up the slack.
"The supertanker is picking up speed," Diess said Tuesday in a speech in Frankfurt, Germany. "We are aligning Volkswagen with e-mobility like no other company in our industry."
The automaker now offers a wide range of conventional and plug-in hybrid-electric vehicles, its Audi brand introducing four new plug-in hybrids at the Geneva Motor Show just last week. But Volkswagen is now placing a premium on pure battery-electric vehicles. It currently offers only a handful of BEVs, such as the limited-range VW e-Golf. But by 2025, the company has announced, it plans to add at least 50 new ones to its lineup, almost all of those offering the ability to travel at least 200 miles between charges.
The first of these next-generation models will begin rolling out this year from the VW plant in Zwickau, Germany, and will be "comparable to the first Beetle or the first Golf," Thomas Ulbrich, Volkswagen's head of e-mobility, said in December.
While specific details haven't been released, the automaker has broadly hinted that it will target the low end of the market. Juergen Stackmann, VW's board member overseeing sales, said it will be priced between $24,000 and $32,000, depending upon the size of its battery pack. The cheapest version will provide 206 miles of range.
The new model — which German news reports have suggested will be called the "Neo" — will mark the debut of an entirely new sub-brand, Volkswagen I.D., devoted solely to battery-electric vehicles. Moving forward, it will comprise a broad lineup of BEVs, ranging from entry-level models up to large sedans and SUVs, as well as an all-electric makeover of Volkswagen's classic, hippie-era Microbus, the I.D. Buzz.
But while the Volkswagen I.D. brand will be the largest collection of all-electric models, the list also will include BEVs marketed through the rest of the carmaker's dozen passenger vehicle brands. That starts with low-end Seat and Skoda, and extends to high-line marques such as Porsche and Audi.
Porsche is set to begin production of its first all-electric model, the Taycan, this year, with an SUV version to follow in 2020. Late last month, Porsche announced plans to add an all-electric version of its Macan crossover, as well.
As for Audi, meanwhile, it showed off the Q4 e-tron battery-electric concept at the Geneva Motor Show last week. It is expected to go into production in 2021. Audi will also get into the BEV market this year with the e-tron SUV, and it is developing a sports car version for early in the coming decade. It will be virtually identical to the e-tron GT prototype that was unveiled at the Los Angeles Motor Show last November.
The electrification program will be expensive, VW announcing that it will spend about 9 billion euros ($10.2 billion) on e-mobility from now through 2023 – a figure that doesn't include the 50 billion euros in lithium-ion batteries VW has said it expects to purchase by mid-decade.
Among other things, VW will upgrade and expand various assembly plants to handle its new, all-electric models. In January, during an appearance at the North American International Auto Show in Detroit, CEO Diess said VW will spend $800 million on its factory in Chattanooga, Tennessee, to handle two all-electric models, a move that also will create about 1,000 new jobs.
To maximize its investment, VW has developed a unique platform, dubbed the MEB, which will be used for all of its mainstream, as well as some luxury, all-electric models.
"The future, for us, is really a dedicated EV platform," Matthew Renna, vice president of e-Mobility for Volkswagen's North American region, explained during a media event at the Chicago Auto Show last month. The MEB platform is "flexible enough to cover a broad gamut of products ranging from an entry level subcompact up to models like the I.D. Buzz minivan and even midsize SUVs," he noted, while adding that upscale models, such as the Audi Q4 and the all-electric version of the Porsche Macan, will rely on a second platform, dubbed the PPE.
The first generation of battery cars, such as the VW e-Golf, had to stuff batteries wherever room could be found, often intruding into passenger and cargo space. The MEB and PPE "architectures," however, are more like skateboards, with their batteries, motors and other key powertrain components mounted in or below the load floor. That frees up passenger and cargo space and lowers a vehicle's center of gravity, improving handling.
Renna said VW is working to address other key issues that have slowed the public embrace of electrification, notably range, charging times and vehicle pricing.
As sales volumes go up, the automaker hopes to benefit from economies of scale, especially when it comes to batteries. Where lithium-ion technology cost as much as $1,000 per kilowatt-hour at the beginning of the decade, that has fallen to below $200 for most manufacturers, according to David Cole, chairman emeritus of the Center for Automotive Research, and could drop below $100 during the first half of the coming decade.
A study by Deloitte released in January predicted that prices on powertrain components will start falling so rapidly that BEVs could reach cost parity with gas-powered models by as early as 2022 – though other studies, including one by the Boston Consulting Group, don't see parity coming until later in the decade.
With most of the products it's developing expected to yield anywhere from 200 to 400 miles per charge, VW also believes it can minimize concerns about "range anxiety." Charging, however, is another matter.
While millions of BEV owners are expected to install home chargers, there will still be a need to expand the availability of public charging stations. In Europe, VW is partnering with rivals including BMW and Daimler to set up a continental infrastructure. In the U.S., meanwhile, it has earmarked $2 billion from the settlement of its diesel scandal to fund a new company called Electrify America. That venture is already installing thousands of public chargers across the U.S., especially on main, cross-country routes like Interstate 80.
That includes the latest generation of Level 3 high-speed chargers capable of providing as much as 350 kilowatt-hours of current – a sevenfold increase over current "fast" chargers. Porsche claims that this would allow the Taycan to add almost 20 miles a minute in range, approaching the speed at which a gas-powered vehicle like the Porsche 911 could refuel.
VW is betting that it can push its electric offerings into the mainstream by delivering more product options at a lower cost, with longer range and shorter charging times. But not everyone is convinced the public will go along.
While global sales of BEVs doubled last year, to more than 2 million, "our projections suggest that supply will vastly outweigh consumer demand by approximately 14 million units over the next decade," cautioned Michael Woodward, automotive partner for Deloitte in the U.K., where the BEV study was produced.
The consulting firm isn't alone. Detroit-based AlixPartners warned in a report last summer that there could be "a pile-up of epic proportions" as more manufacturers ramp up EV production.
Such projections don't appear to concern VW, however, or so it would seem from the forecast Diess issued Tuesday. While there might be an oversupply of electric vehicles on the horizon, the German automaker seems convinced it's an issue its competitors will have to worry about.
Disclosure: An automaker paid for some of the travel costs to the Chicago Auto Show.