Volkswagen will leverage its global footprint to profitably produce a new all-electric SUV called the ID.4.
The vehicle, which will be produced at five factories on three continents, targets mainstream buyers, starting at $39,995 when it arrives in U.S. showrooms early next year. Pricing excludes an up to $7,500 federal tax credit to purchase electric vehicles.
"This is truly a breathtaking global car," Scott Keogh, CEO of Volkswagen Group of America, said during a media briefing ahead of the vehicle's online reveal Wednesday. "I think the upside of that is it's giving us an awful lot of the scaling effects that we need, which of course is giving us the pricing power and we see a very strong correlation between pricing and adoption to electric vehicles."
The ID.4 will be imported to the U.S. from Germany until local production begins at a VW plant in Tennessee in 2022, the company said. The price of the vehicle is expected to drop to about $35,000 when domestic production begins.
VW will produce the ID.4 at two plants in China and two plants in Europe in addition to the U.S.
Keogh said the global production assists with scale and profitability – an ongoing challenge for the auto industry with electric vehicles.
"We do have a positive contribution margin and profit on these cars," he said. "We're not where we want to be yet in terms of the battery cost but certainly in a very good place and getting better all the time."
Batteries for electric vehicles are extremely expensive but the costs are lowering. Keogh declined to disclose the kilowatt per hour cost, a common industry measure of the cost of electric vehicles batteries, of the ID.4's battery.
Unlike many automakers releasing vehicles to compete against Tesla – the industry's electric vehicle leader – VW is targeting the car at mainstream consumers who may be new to electric vehicles.
VW, which opened online reservations for the ID.4 on Wednesday, compared the compact SUV to the Toyota RAV4 and Honda CRV rather than current electric vehicles from Tesla, General Motors and others.
"Our real goal is to drive adoption and get ICE drivers onto electrification," Keogh said, later adding it's a balance of pricing and range. "We know adoption is directly linked to price."
The car's range is an estimated 250 miles. That's comparable to the similarly priced Chevrolet Bolt EV from GM and the entry-level Tesla Model 3 but far below other Tesla models.
The ID.4 will initially be available in rear-wheel drive at 201 horsepower and 228 pound-feet of torque, followed by an all-wheel-drive version with 302 horsepower later in 2021.
"We want this car obviously to be successful and we want this car to build scale," Keogh said, declining to provide U.S. sales exceptions.