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CNBC Transcript: Herbert Diess, Volkswagen Chairman

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Below is the transcript of a CNBC Exclusive interview with Volkswagen Chairman Herbert Diess. The interview was first broadcast on CNBC's Squawk Box Asia on 10 September 2019. The interview took place at the Frankfurt Motor Show in Frankfurt, Germany. If you choose to use anything, please attribute to CNBC and Annette Weisbach.

Annette Weisbach: Thank you very much for talking to us today. Let me first start with the question: what you're bringing to Frankfurt's trade show?

Herbert Diess: I would say the most important product since many years Volkswagen ID 3. We started some four years ago to think about the future of the car. This is the outcome: fully electric car, accessible below 30,000 euros priced, enough range, fast charging, the size of a (Volkswagen) Golf, interior much bigger. We are really proud. And we bring a new brand - Volkswagen invented itself over the past couple of months, with new colours, new brand design, a new brand logo, new appearance. So we are very excited.

Annette: Let me talk about the battery cost because there are reports that you actually managed to have a battery which is less costly than the one from Tesla. So less than 100 euro per kilowatt hour. Is that true?

Diess: I can't comment on the prices of batteries we think because of our economies of scale and this size we are really approaching this new drive train starting in China, Europe at the same time and then really leveraging to the US. We have been talking to battery manufacturers since many many years. We convinced them to newly invest in the latest technology of batteries. So we think we are competitive on the battery side yes.

Annette: Let's talk about the price of those electrified vehicles because they are clearly more costly than others. Well nobody is now stepping out and saying that planning on marketing one below 10 000 euros, is that something you could envision?

Diess: It's probably very difficult today depends a lot on the range of the battery, on the size of the battery you choose. I would ask Renault is it with battery or without battery the price of the vehicle, it's really demanding. We go for a price range of below 30,000 Euros. The outcome is a car which is fully comparable to today's Golf diesel. For many customers it will be the better option because we have much reduced cost for running the car. The car is very modern, accelerates very nicely. So I think we bring a very attractive offer to the market in our core segment which is Golf.

Annette: Let's talk about the third quarter because it was a really tough year for many car makers this year. How is the momentum in the third quarter for Volkswagen?

Diess: It's also tough for us. So the world markets are really some are really in decline. China there's no real recovery in sight so far which is a very important market for us. So it will be tough but still we found over the past months we could gain some market share because of very attractive product. Also very competent sales and marketing organization worldwide. So it's tough for us as well but we defend ourselves quite nicely.

Annette: And let's talk also about the market in the US because it's obviously a very important market to you as well - how are things going there.

Diess: Step by step, we are gaining market share. The new product which is mainly SUV is really finding huge acceptance. For instance with the Atlas, our biggest SUV we have about 70 percent conquest so we bring a lot of new customers to the brand. The brand is reinventing itself as well in North America. We have quite competent new young team as a starting block so I'm confident for our future in the United States.

Annette: So in other words the Volkswagen managed to shrug off the diesel scandals on the U.S.?

Diess: I would say it's still there now and it will take a lot of time to really regain trust and confidence from our customers but we are on the way out of it.

Annette: Let's talk a bit about the political issue. So it's also weighing on carmakers and the outlook for the U.S. China trade war which found another escalation. So what is the impact on business from that?

Diess: I think that doesn't make our life easier. Now we are - this is a global industry. We are depending on trade or on low trade barriers between the main markets. We are very strong in China. China is considerably hit by the trade war. So it's tough for us and we would really appreciate if some of the threats would go away within the next months which we probably don't see. But so far we don't see a recession. It's a tough time. It's a consolidation time in the market but we think with the product we have with the brands we have we are in a strong position.

Annette: And to reiterate that you're not expecting the U.S. China trade to be to be settled pretty soon.

Diess: We receive positive messages all the time - the negotiations are going on. I think the Chinese really made an effort and are making an effort to settle so we didn't lose our hope. But it seems to be really a tough thing which will probably last several months more.

Annette: Let's talk about recession and also the potential of a recession in Germany. Because that is clearly also weighing on your outlook. It seems that the German economy is deteriorating quite fast. So what's your view here?

Diess: Actually I wouldn't see those signals. No. We see a consolidation probably but I don't see a recession in the horizon. People – we have full employment. We have new markets going up we have a lot of technology innovation coming to the market. New business concepts, ideas. So I don't see a recession in the near future.

Annette: And Brexit? It is coming to a close, right? So what do you think will come out eventually?

Diess: It's also something scary and I really I find it very sad because I think we are having so good relations with – and - I have many friends I used to work for years in the UK – and it's really sad that we can't let's say find a way out which we both agree. I still I wouldn't give up hope and we will manage but we have a big plant in the UK as well and they would suffer if it comes to Brexit. So - but I don't give up hope on it.

Annette: Thank you very much.

END

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